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The Misery of Additional Charges by Celcos!

This story is old, damaging and not very pleasing (for the customers). The story is of additional charges which the cellular industry kept imposing due to reasons that we will discuss in below article.

It all started in August 2008, when we first heard of charges on helpline calls. It didn’t stop there, then we heard of 12 paisa charges on balance inquiry – this was August 2009.

Time kept on creeping and we came across 5 percent service charges on all reloads, this was July 2010. During the while, many free services were taken back, for instance, delivery reports.

Now it’s almost July 2011 – and mobile customers are told of new charges, 1 to 1.5 percent of all reloads!

With imposition of recent most 1 to 1.5 percent charges, cellular companies are likely to make Rs. 4 billion rupees in next fiscal year. Which is a huge money, I agree, but do you know that this money will not even cover the fuel cost – spent by cellular companies each year to keep the cell phone towers running during power outages?

For that let’s do a little calculation here:

  • Cost of Diesel: Rs. 85 (Average) per liter
  • Fuel Consumption of Diesel Generator: 3 Liters per hour
  • Average Daily usage of Diesel Generator: 24 Liters (with 8 hours of min load-shedding)
  • Average cost per year per site: Rs. 85 x 24 (liters)  x 365 (days) = Rs. 744,600
  • cost for 30,000 cell sites: Rs. 22,338,000,000, i.e. Rs. 22.34 Billion (approx.)

Now that’s only the fuel, we didn’t include the electricity, maintenance, and other operating expenses.

You will also agree that this cost wasn’t there just 2-3 years ago. Electricity bills inflating, so is the case with procurement and other commodities that are required to run telecom businesses.

The proposition in such a scenario somewhat justifies these added charges, but one may ask a very valid question, which is: Why cellular companies cut the tariff plans if they had to impose charges to meet their expenses?

The answer to this question is the lack of vision at policy making level, which allowed our government to issue 5 cellular licenses for a market which could not accommodate more than 3 competitors.

In a cut-throat competition (like we have in cellular sector), businesses either collapse or they revive through additional levy on subscribers.

We have example of broadband industry, just look at it – how many operators have backed-off? while there are more to pull their hands up before the ongoing price war.

Analysts are predicting that same policy-mistake to happen again with the auction of 3G licenses. From what we have heard, PTA is planning to auction three licenses – which will leave other two operators 3G-less – or two new Paktel and InstaPhone in the making. Most likely, the remaining two 3G-less operators will wrap up their businesses and will go home.

Getting back to the additional charges, it’s time for cellular companies to take considerable steps to make sure that industry doesn’t get damaged. They must re-think their strategy of regularly imposing charges on customers, to nullify their own mistake of getting into price war.

Operators must devise ways of getting additional stream of revenues to coupe up with inflation and other economical burdens, such as by offering real-value added services or limiting their advertising spend – there are so many other ways available too.

Regulator, on it’s level, should look into the matter and must take measures to make sure that customers are not suffered, for the misdeeds they never committed.

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