Pre-paid users behind Bharti price move?

The high rate of churn amid pre-paid subscribers may have forced leading telco Bharti Airtel to join the tariff war.

For the quarter ended September 30, Bharti has recorded a pre-paid subscriber churn of as high as 4.6%, implying that a substantial number of customers moved out of its network during the September quarter.

Consider the numbers — around 95.2% of Bharti’s 110.5 million mobile subscribers were pre-paid users as of September 30. And the pre-paid base is only growing.

Possibly, some of the churned subscribers shifted to Bharti’s rivals offering lower tariffs or per-second billing. With mobile number portability expected by the end of the year in major cities, telcos are fearing subscriber churn like never before.

Mobile number portability would allow mobile phone users to shift to other networks while retaining their phone numbers.

In the previous quarter, ended June 30, 2009, the pre-paid churn for Bharti was much lower at 3.5%. Before that, the pre-paid churn was 3.2%, 2.9% and 3.2% for the quarters ended March 31, 2009, December 31, 2008 and September 30, 2008.

The pre-paid subscriber base in Bharti has been increasing steadily. A year ago, 92.9% of the company’s mobile base was pre-paid, and it has grown to 95.2% in the quarter ended September 30, 2009.

Not surprisingly then, Bharti announced per-second billing only for its pre-paid subscribers on Friday, some hours after its financial result was out. As per the offer, the company will charge 1 paisa per second within the Airtel network, both local and STD.

For outside the Airtel network, calls will be charged at 1.20 paise per second.

It was Tata Docomo that first launched per-second billing in India, and the company was successful in adding a record number of subscribers with the move. Others, including Aircel and Sistema, also came out with per second billing, while Reliance Communications offered a 50 paise per minute tariff.

Bharti had resisted the move to join the tariff war for long, but finally gave in to the pricing pressure. Within hours of claiming that the company did not see any need to match the lowest common denominator in terms of pricing, the leading telco announced the per-second billing.

Bharti’s mobile phone market share slipped to 23.5% in the September quarter, from 24% the previous quarter and 24.6% a year ago.  Among other parameters, average revenue per user in mobile service dropped to Rs 252 per month (Rs 331), while average rate per minute fell to 56 paise (63 paise) and average minutes of usage per subscriber to 450 minutes (526 minutes).

SMS revenue as a percentage of total mobile revenues, however, increased to 4.9% from 4.3% a year ago.