New Delhi, May 7: Cellular operators today came up with the justification for not rolling out their networks in remote and rural areas saying they were strapped for cash as a result of the 17 per cent drop in the average revenue per user (ARPU) even though overall industry revenues had grown by 30 per cent.

Average revenue per user is a key industry performance yardstick that measures the total revenue for the operator during the year. The Cellular Operators Association of India (COAI) said the ARPU for the industry as a whole had dipped from Rs 523 per subscriber in the first quarter to Rs 432 in the fourth quarter.

“The affordability of services for subscribers was further enhanced during the year which, in turn, fuelled subscriber growth. In fact, it is estimated that the number of subscribers with a monthly ARPU of less than Rs 500 has gone up from 28 per cent in 2002 to 46 per cent in 2003,” says COAI.

“As a result, the industry is operating on wafer-thin margins leaving it with inadequate resources to fund network expansion and growth to remote, rural and unnerved areas,” claimed T. V. Ramachandran, director general, COAI.

The total industry revenue for 2003-04 grew 30 per cent at Rs 8,308 crore from Rs 6,400 crore in 2002-03. The COAI report also said the total cellular subscriber base of the private GSM operators doubled from 10.1 million subscribers at the end of March 2003 to 20.5 million by the end of March 2004.

The report claimed that the growth of subscribers was not matched with an equivalent proportionate growth in the industry revenues as more marginal and low-end subscribers opted for the service during the year. In addition to the low ARPU, the industry is also been greatly challenged by the high costs of duties and levies that have been imposed on the sector.

The cellular industry has paid Rs 1,250 crore during the year as licence fee and spectrum usage charges to the government. The annual licence fees paid by the private GSM operators was Rs 954 crore. The industry also paid Rs 290 crore for spectrum usage.

The operators have said the access deficit charge — the fee that private telecom operator pay to the government to finance operators who rollout their services in rural and remote areas — was adding to the cost of service.

The operators said their costs were also rising because of sales tax, service tax, and import duties on handsets. COAI has estimated that the total burden on the sector on account of licence fees, spectrum and access deficit charges imposed by the government is at around 25 per cent.

This is excluding the burden of sales tax and the effects of other levies like service tax and import duties. This is excessive compared with the international practices, claimed COAI.