The apex court order disallowing telcos from using the faster Aadhaar-based verification system could slow the pace of subscriber additions significantly, potentially delaying the company’s plan to acquire a 50% revenue market share, analysts said.
Jio added 11.78 million customers in July, outpacing Airtel’s 313,000, Vodafone India’s 609,000 and Idea Cellular’s paltry 5,489, according to data put out by the telecom regulator on September 18.
However Vodafone and Idea concluded the sector’s biggest merger last month.
The consistently higher monthly additions may make verification costs greater for Jio than Vodafone Idea or Airtel.
“Customer verification expenses will increase in step with the volume of customer acquisition of telcos and so, stronger the monthly user additions, higher the associated verification costs,” said Hetal Gandhi, director (research) at Crisil India.
Crisil does not expect the increased verification costs to have any significant impact on the operating profit margins of telcos, given that such costs account for less than 1% of a telco’s revenue.
Gandhi said “verification expenses per new subscriber addition has declined at a CAGR (compounded annual growth rate) of 10-15% over the past three-four fiscals, and currently is at Rs 120.”
However, Crisil said it was unclear whether physical re-verification of subscribers already verified through e-KYC via Aadhaar would be needed. Such a requirement would push up costs for all telcos.
Analysts expect the Supreme Court verdict to have an overall negative impact on customer acquisitions because a slower verification process will not help attract subscribers in rural areas, where growth potential exists.
A senior executive of a telco said the more tedious verification process henceforth “is also likely to slow down the processing of porting requests from customers.”