Postpaid Subscriptions to Rise in India

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1Q 2017 | IN-4504

Growing data demand and disruptive pricing by new market entrants like Reliance Jio, coupled with the impact of demonetization in India, may boost the postpaid subscriber base, offering operators more predictable revenue streams moving forward.

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Postpaid versus Prepaid in India, as Well as Attractive Offers from Incumbents and New Entrants


95% of the mobile subscriber base in India is on prepaid plans while only around 5% of the mobile subscriber base use postpaid lines. According to the Telecom Regulatory Authority of India (TRAI), the total mobile subscriber base stands at 1.1 billion users against a population of 1.3 billion (December 2016). This equates to just 55 million postpaid subscribers, and the remaining being prepaid users. This disparity has been driven by a number of factors including subscribers wishing to maintain greater control over expenses by limiting their mobile usage, the lack of attractive contracts/bundled offers, and the stringent identification requirements necessary to register for and fulfill postpaid billing obligations.  

In recent times, attractive—and what may be considered to be disruptive—offers from new entrant Reliance Jio shook the postpaid and prepaid space, forcing other telco operators like Bharti Airtel and Vodafone to revise their tariffs and offers to remain competitive. This includes cheaper pricing on postpaid plans, making some plans more attractive than other prepaid offers with the inclusion of generous data usage limits, and freedom from frequent top-ups and service disruptions due to nil balances. 

The possibility of combining such attractive offers with a smart handset device in a bundled plan under contract presents potential subscribers, both first-time users and existing prepaid users, with a tempting value proposition. However, to take advantage of these offers, a subscriber would need to have appropriate identification papers (necessary for prepaid registration, as well) and preferably a bank account or debit card to make timely bill payments for his or her postpaid lines.  



The decision by the Indian government to demonetize higher denomination (INR 1000, INR 500—worth US$15 and US$7.50 respectively) bank notes in November 2016, led to a surge in residents applying for official identification papers such as voter ID cards, tax identification cards, and mostly the biometric Aadhaar identity card to serve the purpose of opening a bank account so as to deposit cash in their possession to ensure their money does not become worthless. The result of this exercise is that many more residents now have official identification cards and can operate a bank account/debit card. Government statistics confirm more than 15 million new bank accounts have been opened since the demonetization announcement, and this number continues to rise in line with its financial inclusion plans extending beyond urban metros to rural areas.   



The gap between prepaid and postpaid pricing has narrowed; this is expected to drive growth in the postpaid subscriber base. Some of the attractive bundled offers for postpaid subscribers combined with greater smartphone penetration (currently below 30% at 275 million, and is expected to more than double to over 60% by 2020, with nearly 400 million new smartphone additions between 2017 to 2020 according to GSMA projections) in line with growing demand for access to mobile data and having appropriate identification documents should be drivers to facilitate the switch from prepaid to postpaid subscription in a number of cases. The switch is expected to occur mostly within the urban metropolitan areas where literacy, employment, income, pace of technology adoption, and smartphone usage are generally higher. This switch may be reinforced by the increasing acceptance and usage of apps such as Whatsapp for free calls/messaging made possible with data access using 3G/4G. The government’s recent initiative to support the adoption of smartphones to forge a connected and smart nation (with the provision of Wi-Fi spots across cities) and its continued strong focus on making the biometric Aadhaar identity card a mandatory identification document for all subscribers, should further accelerate the switch. In addition to existing prepaid subscribers switching to postpaid, first-time/new subscribers may choose to go with postpaid lines to make the most of some of the attractive offers in the market.

Therefore, the share of postpaid subscribers in India is likely to exhibit an upwards trend. Data revenue is expected to overtake voice/SMS revenue and an increasing postpaid subscriber base capitalizing on the latest market developments will not only result in more predictable billing revenues for operators, but it will also allow operators to better analyze customers’ usage patterns, resulting in potentially greater mobile advertising related revenues.        


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