Postpaid mobile users switch to prepaid on value quotient

postpaid vs prepaid image
Postpaid mobile users switch to prepaid on value quotient


KOLKATA: Mobile phone users appear to be moving from pricier postpaid platforms to value-rich prepaid plans, negating efforts of telcos to push more users to a segment that generates higher revenue.

This move to prepaid plans is reflected in a near 2% sequential fall in postpaid subscriber base in the September quarter, a key reason for the 10% fall in revenue from the segment, analysts said.

Market share of the already dominant prepaid segment has crept up to nearly 95.6% of the total subscriber base (including 4G LTE users) in the September quarter from 95.52% in April-June, with the postpaid user base slipping to 51.74 million, according to recent data from the telecom regulator. Sequential growth in prepaid market share is evident across metro, category A and B circles.

Postpaid segment revenue dropped 10% to Rs 5,900 crore from the June quarter, brokerage Kotak Securities said in a note, analysing the regulator’s report on recent performance indicators. Conversely, prepaid revenue rose 9% to Rs 24,000 crore, largely on back of Reliance Jio numbers, which are now being counted. The contribution of the postpaid segment to industry revenue has dropped to a low of 20% from around 30-40% in FY16, experts said.


Telcos would like to get more subscribers onto their postpaid plans to boost revenue, but with better deals available in the prepaid segment, the trend is likely to further increase financial pressure in coming quarters.

“The struggle for postpaid customer acquisitions will definitely get bigger for top phone companies in the coming months, given the wealth of bargain offers in the prepaid platform” amid continuing price competition in the sector, said Fitch director Nitin Soni. Kotak Securities backed the view, saying “the disproportionate pricing decline” in the prepaid segment had created “material price-value gap” between prepaid and postpaid offerings that induced customers to move to prepaid segment.

Experts said the pressure on postpaid revenue is also reflected in price corrections and retention discounts in the segment. Not surprisingly, quarterly consumer level wireless spends were nearly 23% lower than the peak levels of Rs 38,800 crore in the June 2016 quarter, brokerage Kotak said. Consumer spends, net of wireless indirect taxes, stood at Rs 29,900 crore in the September quarter, down 22% year-on-year, it said.

“Tariff resetting in the early part of calender 2017 has had a negative impact” on postpaid revenue, said Prashant Singhal, telecom, media and technology leader for emerging markets at EY. To be sure, the convenience of the postpaid platform “could not be replaced by prepaid, given the benefits of uninterrupted voice, data services and international roaming as well.”

Growth in the share of prepaid customers in the fiscal second quarter could also partly be “triggered by Jio’s strong customer acquisitions, which largely happened in the prepaid platform,” Soni said. “A chunk of postpaid customers with fringe players such as Reliance Communications, Telenor or Tata TeleservicesBSE -1.25 % that switched off their networks, are reckoned to have settled for Jio’s prepaid offers, which could have also boosted the overall share of the prepaid segment in the fiscal second quarter.”

Source by:-economictimes