I have heard many absurd proposals related to the mobile industry, but this about takes the cake.
Pakistan’s government is considering a radical plan which could dramatically alter the mobile phone industry in the country – as it mulls proposals to ban Prepaid SIM cards from sale.
The Interior Minister Rehman Malik said that the government is considering a phased ban on all prepaid SIM cards in an effort to clamp down on terrorism in the country.
However, with something in the region of 97% of the entire mobile subscriber base on PrePay tariffs, the impact on the industry would be huge.
In addition to the costs of upgrading billing systems to cope with the surge in contract customers, and having facilities in retail stores to cope with the migration – the networks would also face a hole in their finances as payments switch from in advance, to monthly in arrears.
The report misses a key point: the cost of generating bills, delivering them, collecting on them and so on. One of the key conditions for the success of the Budget Telecom Network (BTN) model was lowering the transaction costs of dealing with long-tail customers (those who yield small revenues individually). These costs are dramatically higher in post-paid.
Transaction costs have to be paid by someone–in the end the customer. If the government of Pakistan acts illogically to raise transaction costs, the necessary result will be that the prices, in some fashion, will have to increase, with disproportionate impact on the low-revenue-yielding long-tail customers. Many of them will drop off the system.
The ramifications are broad. For example, the Minister should be aware that this could also result in a decrease in incoming international calls to Pakistan.