Lifetime free prepaid

Posted on March 19, 2006 / 6 Comments

At the Delhi Indicators Meeting earlier this month, there was discussion about how one would count the lifetime free subscriptions being offered in India. The following excerpt from Business Today, may shed some light on this new product:

“However, there’s more to lifetime offers than meets the eye. First, call charges at Rs 1.99 per minute for local and Rs 2.99 per minute for STD are not necessarily low. Customers with ordinary prepaid cards pay anything from Rs 0.70 (local) to Rs 1.20 (STD). As BSNL Finance Director S.D. Saxena puts it, these schemes do not benefit customers who make outgoing calls. They are for those who don’t (but receive lots of calls), such as an aged parent or a chauffeur who have traditionally opted for ‘free-incoming’ schemes. Then, the talk time offered by lifetime schemes (between 12 minutes in the case of private telcos and 49 minutes for BSNL) is too low for the Rs 999 they charge. Most telcos claim that customers will not have to pay any transaction charge on future recharges and that they will get the entire talk time they pay for.

Next is the whole question of ‘lifetime’. As far as we can make out, all the telcos stipulate that the cards must be recharged at least once in six months for you to stay connected. And, at least one telco has stipulated that the scheme remains valid only as long as the subscriber has a minimum charge of Rs 5 in the account. If the amount falls below that, the subscriber pays the entire Rs 999 again.”

6 Comments

goswami
March 22, 2006, 4:11 pm
Tariffs for lifetime schemes can’t be hiked: TRAI

Times of India Wednesday, March 22, 2006

NEW DELHI: Keeping the consumer’s interest in mind, telecom regulator TRAI on Wednesday ordered that telecom companies promising schemes of lifetime validity in mobile connectivity cannot increase tariffs in such schemes during the entire period.

“Hike in tariff is prohibited for any tariff item specified in the lifetime tariff plans during the entire lifelong validity period. In the case of tariff plans other than plans with lifetime validity which have a component of upfront payment, service providers are not allowed to hike tariffs during the promised validity period of such plans,” TRAI said in its order.

TRAI had asked the operators who had offered such schemes on what would happen if there was a change in traffic patterns and Interconnect Usage Charge (IUC) regime and how the consumers would be protected against a hike in tariff.

COAI had urged the regulator to allow operators to hike tariffs in an effort to meet any revision in IUC regime. The regulator has now struck down this request and has put to rest one of the most crucial issues in these plans.

“With a view to protecting the interests of subscribers who make an upfront payment in lieu of certain promised features, including the validity, and also to bring more clarity to the concept of lifetime validity, the Authority considered it necessary to issue orders in this regard The order said that in case of tariff plans offered or marketed as having lifetime or unlimited validity in lieu of an upfront payment, subscribers to such plans will continue to get service as long as the service provider is permitted to do so under the current licence or renewed licence.

The service providers who offer such plans will inform the subscribers of the month and year of the expiry of current licence.

And in case of tariff plans other than lifetime validity schemes, subscribers to them will also continue to get service during the entire promised validity period.

The subscriber will have the right to choose any tariff plan at any point of time, TRAI said.
Laurent Elder
April 1, 2006, 3:20 am
Quite an important issue in my view. My experience in Senegal, which I imagine is similar in all countries that have CPP, showed that most of the poor spend their pre-paid credit quite quickly and then keep the phone as a “receiver”. It is justifiably frustrating then that the pre-paid card’s vailidity runs out. I had imagined that regulators should possibly think of taking action to “force” providers to get rid of the time limit, so I’m quite intrigued by the fact that providers themselves have decided to use this to their advantage as a marketing strategy in India. TRAI’s action though seems quite judicious from the point of view of the consumer. I definitelty think there is much to learn from INdia’s experience (some questions include: should regulators be proactive in this area? how are the poor atually using their pre-paid cards? etc..) and LIRNE Asia is well placed to dig into this issue and share the experience more broadly…to be continued I guess.
goswami
April 4, 2006, 10:44 am
I understand that the current mobile licenses are valid for 20 years and who knows if they get renewed or not or the company stays in business, so “lifetime” may not be defined by one’s longevity. And as the first article states, the user has to load up the card every 6 months for the sim card to remain valid, although recharge amount can be as little as Rs 10 and taxes and service charges that apply to other prepaid schemes are for some reason not applicable to the lifetime scheme. I think the danger is that if an user forgets to charge up every 6 month they will forfeit their $20. What isn’t clear from the articles is if incoming calls are also free when roaming outside the circle.

The Shoestring survey was done before the lifetime schemes were introduced, it would be interesting to see in the second round of the surveys if users are availing of this.
goswami
May 12, 2006, 12:25 am
From the research report from Pyramid below that Amy Mahan sent me, there are three important findings relating to lifetime prepaids:

1)With the introduction of lifetime prepaid schemes there has been a significant increase in the number of new users added every month. Average monthly additions that were 2.21 in the period rom March-Nov 2005 jumped to 4.46m over Dec 2005-Feb 2006. So prima facie, it looks like the scheme is appealing to a segment of users that wouldn’t have signed up for the regular prepaid schemes. Who are they? I think that would be interesting to find out.

2)Customer churn for mobile service that was quite high in India is expected to fall thanks to lock-in effect of the high down payment for the lifetime scheme making it unlikely that a subscriber will switch mobile providers as often. But the downside to mobile operators is that..

3)Because of free-incoming and little outgoing calling behavior expected from lifetime subscribers, ARPUs are expected to fall to as low as Rs. 247 (US$5.46) by 2010!

http://www.pyramidresearch.com/em_may04_india.htm?SC=PD05a
Divakar Goswami
December 20, 2006, 10:36 pm
TRAI study finds that Lifetime prepaid has been very successful and has contributed to the spike of new additions. 16 million subscribers have signed up for this package and 51% of subscribers who signed up were newly acquired. The scheme has also been financially viable for the operators as well since each subscriber on this scheme is generating ARPUs of INR 218 (USD 4.85) versus INR 268 (USD 5.96) for the overall prepaid segment.
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Lifetime prepaids huge success: TRAI study
http://www.thehindubusinessline.com/2006/12/20/stories/2006122004230400.htm
Mahendra Singh Bisht
February 13, 2007, 3:12 pm
Hi Friend I am working in Delhi Police.