A third of SIM cards in India are inactive

Out of every ten people owning a subscriber identity module (SIM) card in Mumbai, four don’t use it at all, while countrywide, nearly a third of registered users are inactive.

Which beggars the question, how real is India’s telecom success story?

Data from the Telecom Regulatory Authority of India (TRAI) show that out of 811.59 million registered subscribers as of March 31, 2011, only 70.72% or 573.97 million are active.

And that number has been declining month on month, indicating operators are either pushing SIM cards to ratchet up their subscriber numbers or users are holding more than they need.

Active users were a percentage point more in February and January.

TRAI started tracking mobile data based on what’s called the visitor location register (VLR) last December and has since maintained a monthly record to mark a distinction between active and non-active users.

The VLR contains a copy of the records of all subscribers that are currently in the geographic area covered by a mobile switching centre (MSC.) It is, however, temporary data which exists for only as long as the subscriber is “active” in the particular area covered by the VLR.

Explaining the full import of the growing gap between active and non active mobile users in the country, Mahesh Uppal, promoter and director at Com First (India) says: “In India spectrum rules encouraged operators to issues as many SIM cards as possible, often free. Such rules are unique”. This lends further credence to the charge of spectrum mismanagement by the government, which is already under fire in the 2G scam.

Nitin Soni, an analyst at Fitch Ratings, said TRAI’s disclosure VLR reports provided a clearer view on subscriber market share and other key operating indicators such as average revenue per user (Arpu).

He said the market shares of leading players could have been distorted by the inclusion of non-active customers in the subscriber count.

Among operators, Idea Cellular’s active subscriber base increased to 93.07% in March compared with 90.04% in December-end 2010, while Bharti Airtel’s declined to 90.72% from 91.79%.

Vodafone’s was 79.47% against 75.90%, while the state-run BSNL was the worst performer with 53.28% active users, down from 56.94%.

New entrants haven’t done well either. Active users for Etisalat were 34.15%, S Tel 37.13%, HFCL 41.85%, Videocon 44.26%, Loop 43.52%, Sistema 50.70% Aircel 55.55%.

Fitch’s Soni said the new players faced an uncertain future. “They are facing increasing difficulties with few active customers and an uncertain regulatory environment.”

Among circles, Mumbai is the worst performer, while J&K has most VLR users. TRAI’s data for March shows J&K’s active subscriber base at about 79.63% (81.84% in last December) followed by Assam at 78.18% (79.16%) and Maharashtra at 76.79% (77.73%).

In comparison, Mumbai’s VLR is just 58.49% (57.97%), and Delhi’s 69.61% (68.18%).

Buy why does Mumbai fare so badly? Uppal at Com First said, “Mumbai has a large number of subscribers with multiple SIM cards. They use at best one or two of them. These cards have been historically acquired, but nor surrendered.” Fitch’s Soni added: “Operators in big cities like Mumbai generally inflate their subscriber numbers.”

Is there a case for spectrum allocation for operators with high percentage of inactive users?

Shobhit Agarwal, managing director at Protiviti Consulting, a consulting firm, said, “If spectrum allotment is being done on subscriber numbers with defined timelines which is engraved in the policy, vacation of spectrum by operators not reaching the threshold may be considered”. Uppal at Com First, too, endorsed the view arguing that “All unused spectrum must be got vacated irrespective of who hold it”.