Call it the death of post-paid mobile user in the world’s fastest-growing mobile market. India has all but completely rejected the post-paid option, with nearly 99% of new mobile user additions in the country accounting for by pre-paid connections.
With mobile operators increasingly doling out cut-price offers for newer, often poorer users, customers are also embracing this platform with gusto.
Consider this: Bharti Airtel, India’s largest mobile company by user base, added a record 8.1 million-plus new customers during the October-December 2008 quarter, of which 99.6% were pre-paid users. Ditto for Reliance Communications, Vodafone Essar and Tata Teleservices. About 99.9% of RCOM’s 5.5 million new additions in the quarter went in for a pre-paid connection, while for Vodafone Essar and Tata Teleservices, the numbers were 97.3% and 96%, respectively.
“Fundamentally, the Indian consumer prefers pre-paid as it empowers him. The customer wants to control how and when to spend and sees real value on a call-by-call basis in pre-paid,” said Bharti Airtel’s chief marketing officer Sanjay Gupta.
The switch towards pre-paid from post-paid connections has been steadily climbing. From accounting for about 60% of the country’s total subscriber base in 2005, pre-paid users now constitute over 92% of India’s mobile customer base.
Bharti’s numbers for October-December 2007 quarter show that a little over 95% of new additions preferred pre-paid connections. For Reliance and Vodafone Essar, the comparable numbers were 96% and 92%, respectively, of net customer additions.
Mr Gupta said that pre-paid growth was aided by three factors. “First, the revolutionary lifetime pre-paid concept has done away with the cost of entry and validity. From Rs 999 earlier, it costs a mere Rs 99 for a lifetime connection, which does not require a recharge to stay connected. Second, unlike most other countries, the consumer does not pay for an incoming call. Third, pre-paid follows a sachet approach as customers can recharge for as low as Rs 5 or Rs 10 when they want to use their mobiles,” he said.
Vodafone Essar’s marketing head Harit Nagpal says it also suits operators too to have their new customers on the pre-paid platform “Post-paid customers need verification, credit rating and collection infrastructure in every geographical service. Today, new additions are mostly from rural and interior India, which lacks this infrastructure. Unlike other countries, a significant majority of India’s population do not hold a bank account which acts as a collection infrastructure,” he said.
Mobile operators also point out that a post-paid connection required a minimum spend — known in telcom industry parlance as average revenue per user (ARPU) — to be viable. “Since, most of the new entrants cannot bring in this ARPU, operators want them on pre-paid,” Mr Nagpal added.
According to a top executive with another GSM player, telcos’ operational expenses increase multiple times when it comes to post-paid users: “From generating multiple billing cycles depending on the tariff plan chosen by the customer to increased IT deployments to higher manpower requirements, the costs shoot up,” the executive said.
But, Bharti's Gupta is of the view that rural customers will always choose pre-paid connections. "Typically, Indians start with pre-paid as they are unsure of the usage. Over a period of time, after they are accustomed to using a mobile phone and the tariffs, a small segment switches to post-paid," he said.
Besides mobile customers in India also do got get the usual benefits associated with post-paid connections such as free handsets, lower tariffs and discounts on value-added services which are available in more developed markets. With call tariffs in India already one of the lowest in the world, post-paid connections offer little value to the typical Indian mobile user.
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99% of new mobile connections in India are pre-paid 
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