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Reliance Comm cuts service to 4.2 mn users

Reliance Comm cuts service to 4.2 mn users
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First Published: Mon, Apr 09 2007. 01 20 AM IST
Updated: Mon, Apr 09 2007. 01 20 AM IST
New Delhi: Reliance Communications Ltd, India’s second-biggest mobile services firm, has disconnected over 4.2 million subscribers, equivalent to 15% of its customers, following its inability to reverify documentation of its entire prepaid user base by the 31 March deadline set for cellular companies by the Union government.
“As on 31 March 2007, Reliance Communications has completed reverification of 85% of its entire wireless subscriber base, in accordance with the industry-wide requirement from the government’s department of telecommunications (DoT) in the interests of national security. In accordance with DoT’s requirements, subscribers who could not be verified at the end of the stipulated period, despite intensive efforts made by the company, have been deactivated,” the operator said in the statement.
The company clarified that many of the logged-off subscribers may be brought back to the network as the company continues its efforts to check documentation.
“We will continue our subscriber reverification initiatives, and customers submitting the requisite complete documentation will be reactivated within 48 hours,” the company said in the 6 April statement. The 4.2 million disconnections took place in April, a second Reliance Communications spokesman said from Mumbai.
Reliance Communications expects a “large number of customers to come back” and its “numbers to be no different from industry” averages, said a spokesman for the listed company, run by billionaire businessman Anil Ambani.
The DoT, worried about the use of mobile phones by criminals, had asked cellular firms to disconnect services to customers who did not have documentation, such as a proof of address, which is mandated under government rules before issuing a connection. A sample study by the telecom department last year had found that two out of five prepaid cellular customer accounts did not have such documents. About 85% of cellphone customers in India are prepaid subscribers who pay their bills through recharge vouchers bought from any of the thousands of retailers spread across the country.
Going by preliminary estimates furnished to Mint on the 31 March-1 April weekend by chief executive officers and senior officials of Bharti Airtel Ltd, Bharat Sanchar Nigam Ltd, Hutchison Essar and Spice Telecom, India’s major cellular service firms are likely to have net drop-offs of between 0.5% and 1% of their current user base because of document verification issues. None of these companies provided the initial drop-off data, which is what Reliance has disclosed.
The final numbers of customer disconnections will likely be available in the April subscriber data, to be released in early May by industry bodies, Cellular Operators Association of India and the Association of Unified Access Providers of India. The industry may yet shrug off the disconnections as it adds new subscribers at growth rates that are the fastest in the world. India’s nearly 160-million cellular customer base is estimated to have grown by more than eight million or 5% in March.
Reliance Communications claimed the drop-offs are likely to have a beneficial impact on its per-user revenues.
“There will be no adverse impact from the reverification exercise, either on total revenues or profitability, as the de-activated customers did not generate any material revenues in the last quarter. In fact, Reliance Communications’ Arpu (average revenue per user) is expected to increase by 12% as a result of the re-verification exercise, making it one of the top three players in India in terms of Arpu,” the company’s statement read.
The company, which had around 28.3 million wireless customers, including subscribers to both its CDMA (code division multiple access) and GSM (global system for mobile communications, a European standard) networks, at the end of February, said it still had “over 28 million” users at the end of March, after it added 1.2 million new connections.
While the other mobile operators have said they expect to lose subscribers in the range of a few hundred thousand each, Reliance Communications is the first to come forward with the number of customer disconnections. Rival CDMA operator Tata Teleservices announced last month it had completed verification for 99% of its subscribers.
Reliance Communications shares last traded at Rs397.45 on 5 April on the Bombay Stock Exchange. While they are well off their 52-week high of Rs518.40 set on 5 February, they are trading significantly higher than the 52-week low of Rs186.40 on 8 June 2006.
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First Published: Mon, Apr 09 2007. 01 20 AM IST
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