The Misery of Additional Charges by Celcos!

prayerThis 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.

Tech and telecom reporter with over 15 years of experience, he works as founder of ProPakistani.PK

  • Only an overall expenses details vs the overall earning details can justify this… are we saying here that only by imposing such charges a cellular company can earn and fulfill their expenses… I don’t think so. :)

  • o bhai ye charges laganay k bajaye free hrs, free minutes, khatam karain na a company never sets a price/charges that’ll result in a loss, I think in companies ko apnay management accountants and finance professionals sack karnay ka waqt a gaya hay jo pricing he sahi set nai kar paa rahay, kon kehta hay k 10 paisa ki call karo, youth ki ____ ____ aik kar di hay is free night packages ne, wohi cost cover karnay k liay phir extra charges lagatay hain….. dumb as****!!!!!

    [Comment Edited]

      • Very well said. Yeh ________ logoun ko ayashioun per lagana choorain or phone ko use kerwain na communication kay liay. yeh night packages or gupshup packages, yeh fazool time zaya kernay walay kam per logoun ko laga ker logoun ko bhe gumrah kertay hain or khud bhe nuksaan uthatay hain.

        [Comment Edited]

    • exactly, fazool services khatam hon to Pakistani bhi apna waqt kahin aur lagain.

      Happy hours kon ziyada use kertay hain? boy friend girl friend, jinho nay apnay numbers kisi party ya college road per paper main likh ker aik dosray ke taraf phenkay hotay hain.

      SMS packages kahan istemal hotay hain? fazool jokes old same jokes poetry aur jhoti porani batain bar bar phelanay main.

      yeh kaam kon ziyada kerta hai? wo log jo paisay ko waisay rotay hain laiken mobile first class, balance khud b zaya kerna aur daily card sahelion ko bhi bhejna, itna nahi pata hota kay saheli cards kisi aur say bhi leti hay LOLz :D

      main larka hon aur main nay SMS main larki ban kar kai lahorion say free balance aur cards liyay hain :D

  • Companies are earing lot of money by sell thing in bundle packs.
    Like SMS bundle voice bundles
    they can earn revenue by VAS if they try to intoduce not only entertainment

  • To add more, by imposing these charges, cellular cmapnies are contradicting their own statement of fewer cellular usage due to increased taxes.

    Having higher service cost is one thing, but how they gonna convince government to lower taxes after these charges?

    • It is not up to the telcos to convince the government though they have been doing so for the past many years. The charges being applied by all operators simply shows the desperation to cover ever increasing cost. (Read comment at the end)

  • Aamir Shaib ap Ku atni Tarif dari kar raha hain telecom sector ke. Agr is sector main b comption nai hota to aaj har kissi k pass mobile nai hota. Jasa comption na hona k waja sa aaj har kisi k pass Roti nai ha, Petrol nai hai. per mobile ha…. Comption is every thing. if they unit then think a 100 RS load will only recharge 10 Rs. Due to Tax etc and call rates are 15/min or more. just think about it, don’t portrait them an angle they are Tycons of Industry if they does not stoped now the end result is Bang. No phone as no petrol, No electricity , No Food….. Just think.

  • Day by day they will impose any more charges.

    Anybody can put a case in SUPREME COURT or send these details to Chief Justice. Might be they take some action.

    • Its not time for talks, its time for implement, You know when ever a single company will culprit then a single citizen can sue on that company but why not it happens in Pakistan?

  • Completely corporate thinking. You are justifying a creepy move which ll cost us but ll give nothing in return. They are earning in billions and you are doing simple maths to convince the public. To earn even more, they should introduce new services, they must be creative. Instead of imposing new taxes, they must cough up something new, innovative and interesting.

  • “cost for 30,000 cell sites: Rs. 22,338,000,000, i.e. Rs. 22.34 Billion (approx.)”
    They should go Solar! A 200watt High Quality, 40 years warranty, Solar Panel costs around 25000. They will easily recover the total initial cost in 2 Years. After that its Free Energy.

    • Damn.. my crude estimates say that it cheaper to operate site with Solar Panels than on Diesel.
      One Tower’s Fuel Cost (yearly): 7,44,600/-
      Add Generator Cost ( 1 time)__: 000000
      TOTAL_________________________: 7,44,600/-
      Typical Energy requirement of a Tower (including a 1.5T AC): 0.7 to 3.5kW
      Cost of Associated panels to generate this much power: ~6,00,000/- (per panel: 200w/Rs. 25,000)
      Add this Company’s Controller to it:
      Cost of starting the AC’s with Generator than shifting to Solar: 85x1x365 = ~32,000/-
      Cost Solar Panels (one time)_____: 6,00,000
      System Startup Fuel Cost (yearly): 32,000
      Controller Price (one time)______: 00000
      TOTAL____________________________: 6,32,000/-
      Running a site for 8 hours on Diesel (estimate): 7,44,000/-
      Running a site on Panels for 10 Hours (8am-6pm) (estimate): 6,32,000/-
      Am missing many variables here but lets say the cost is double what I calculated. Than imagine you will cover it in 2 years. After that IT’S FREE!
      TELECOM Companies should think about their strategies & policies first. Make room there and if not possible than force taxes on consumers. May be the second one is easier than the first one.

        • No, here am talking about running it directly from the Panels. You can use batteries for an extra 4 hour backup (at night/no light situations).

          • Is Solar panelling is a good option in a country like Pakistan? I used to think that as well till we actually saw the implementation of it in the Telecom market. The panels are good and can last long but the heat here kills the storage units. The units that are gauranteed for 7 years of operations become useless in 2 years. And just that you know, I am talking about imported storage units.

            That means the maintainance cost for solar powered cell sites is not business friendly. In certain cases it is less than the cost of running a cell site with diesel but is an exception only to ares where fuel tranportation is impossible or too expensive. In theory this all sounds good but it actually is not.

      • Thats a better plan if cellular operators are willing to think.
        They will also get rid of incresing electricity bills by shifting to solar energy

  • agar company loss main hai to telenor aur mobilink ko ops merge kar laine chahiyen ya phir pack ur bag and go home

  • As far as I know a lot of celcos are going solar. Warid has done some bit of work in this area and I think Telenor is following them. Its very logical, solar is expensive but in the long run it is affordable.

  • 1. Bad way to justify the extra expense but i think people are aware now because they are already paying a lot of taxes on every recharge and every call/SMS, so change the way of justifying these fool things just as “Hellodrsoul” said.
    2. I think companies ko Govt. se problem hai aur saza awam ko di ja rahi hai…..kya yeh khula tazaad nahi???

  • If are really in loss then why they giving free min and sms?
    In real these all is the mistake of goveranment. if they not allowded companies how can they do this.
    Like governament they also want to make money at any way.

  • I think amir wrote this article on behalf of ufone,mobilink,and this way they will less critical reaction made by people.and i think companies also paid to amir ata getting full support of people.

  • Dear Amir, you wrote an article couple of months ago about “Deductions on Mobile Recharges by Retailors Should be Stopped” and I do not see any follow up for that ….. I guess you are still working on “The Misery of Additional Charges by Retailers” ….right …. in which you will tell us because retailers profit has been decreased from 4% to 3% and then load shedding/electricity cost/normal living cost/fuel charges etc. gone up by more than 50% etc…….? if these justifications are not enough for a poor man to earn a bit more to survive then how come these are justified for big companies???

    Qu bhai load shedding siraf big companies per aaser andaz hoti hai …. fuel charges se siraf big companies hi ko nuksaan hota hai kia? yeahi to dogli policy hai sub ki ……. bara chor baray baray dakay daal le … us ko sub salam karain per ghareeb ko zindagi guzarney ka koi haq nahi ……

    wesay Amir ke article dekh ker lagta hai ke woah topic ko is terhan present kerta hai ke us per ziada sa ziada comments aay …. pata nahi kon sa aachar dalna hai amir ke in comments ka :-)

    • Bro I have planned an article, in response to your comment. Will make it live on Friday, inshAllah

  • Oh God, Don’t know what to read what not, with whom I should be agreed with whom not everyone is right but the main thing is instead of pulling Aamir or Telecom companies, you should pull the Govt, where the world is today, where the people are reaching today & tomorrow? & where we are going ? in 2011 we are short of electricity ah its quite disgusting just when I think. Its totally the game of govt I don’t know what & why they don’t want not to occur the load shitting but the govt is 100% involve in this matter & never want any solution to it, I will never say there is lack of intelligence in our country but let say it is for Govt because in Pk no body looks your intelligence but how much you are willing to pay & who is supporting you on back. But there is also lack of intelligence ? Lack of technical people in the whole world ?? even in china ? who are ready always for this project ?
    Point Govt always…
    Thank you

  • Come on Aamir Bahee,

    22.4 Billions !!! its not a big deal for Cell phone Companies as they are already earning a sum of revenue of Rs. 236 Billions as per following post

    Thus 22.4 is mere 9.49% of the revenue to cover this fixed cost. Hence 90.51% is still there to cover variable cost.

    I think 90.51% is more than enough to cover the variable costs.

    The only target of these companies seems to be cover all fixed cost via direct part and maximize GP rate.

    The forum is still open for discussion. Any Finance specialist can shadow more light on this.

  • Is this consumers’ fault if they aren’t using solar energy for their cell sites? If they use more expensive ways to run their cell sites this is their choice but rather than pushing so call “admin” charges ..which is like line rent for prepaid, they should increase call rates straighaway so their false claims of low priced calls come under real light.

  • This has been a slow train wreck in the making from the date the new operators started, Instead of doing some very important things up front, immaturity an inexperience set in. The marketeers set their sights on reducing the prices to a ridiculous level and in the battle of advertisements all long term rationale was lost.

    There is no formal or informal Association (egos, immaturity, ‘its other people’s money’)in this space which can set some guidelines to stem the rot, cooperate and collaborate in doing inter-network roaming to free up capex for redeployment and optimization, have a common strategy towards PTA and the Government and much more.

    These short sighted measures are going to get egg in their faces – it does not do good to screw your customers. Once this becomes a salacious item, these companies are going to be on the media answering some tough questions…the likes of Mubashir Luqman’s of the world will ravage them and they will not have a supporter with them – after they have alienated their own constituency: the loyal users.

    In my humble opinion, the users are being cheated already. Just think for a minute: 60M users (not 100M!) with prepaid connections. The billing process can easily take off 3-5 rupees a month for rounding off leaves approximately Rs. 240M/month as windfall for doing nothing.. the story continues.

  • Mobilink and Telenor are sharing tower in our area but still, inside my home, Mobilink has 100% signals and telenor only 40% to 55%, if i hav to make a call , either i have to go on the roof aur outside my home (ufone 100% and Zong 80% signals in our area).

  • They are just trying to counter the GST that will imposed on them by the government pretty soon. Unlucky us!

  • Cellular company ki chamcha giri q shuru kar di hai Aamir bhai. Yeh costing ap nay extra charges ki show ki hai na, apni pocket se tu company walay fuel charges pay kar nahi rahay hain, hum se he lay ky pay karte hain. They are earning HUGE…

  • kia PTA soo raha hai? yeh companies apni man mani kaisi ker sakti hain? kia consumer rights koi cheez nahin?

  • Every one in our country is thinking about himself no one is thinking collectively.

  • Poor Mobile Operators so sad for them :d. what F_ _K…… They are getting Money from External Sources for providing Network which can track any one in the region. so they can bloody catch them. dont you know etisalat is operating in Afghanistan :) are they working for loss . No my dear they have mission to track and log complete details of every customer from purchasing a SIM to going anywhere even they track which mobile set changes sim with new sim and continue to track through IMEI number. watch Nat Geo and you will see how they track u. Bloody Terrorist stalking everyone.

  • i was receiving full articles before but now i need to load this web to read whole article. , sad :[

  • Aamir, Nice post :)

    Further, I understand there is a hue cry amongst the users of the cellular services, but there is one simple question, if anyone can answer.

    Since last 2-3 years all our cost (Fuel, food, electricity etc) has shot up by 200-300 percent, whereas the cellular tariffs in lieu of competition has been on a declining trend. My question is “Is it not fair for the operators to also adjust their prices/additional charge to compensate for the soaring prices which is also affecting them directly as well – not to forget, 4 out of 5 operators are in losses which were once blooming.

    Trust me, most of you would say that Operators can simply stop price wars and increase prices etc BUT when that will happen, all of us will again initiate the same dialogue.

    Think what we want !!!

  • Tariff should be revised/adjusted accordingly.
    Electricity tariff increased by Govt Yesterday,fuel charges are at high (Although revised little yesterday), load shedding is at peak,Head account is getting high every financial year, Marketing cost is getting high(Every quarter agencies revised their rates)
    Rental charges of co locations, BTS,RBS,Office locations etc.
    Financial Charges/Bankers rates, are increasing day by day.
    Zong is in great loss and just a couple weeks ago they asked their COO Mr Zaffar Usmani to resign.
    Warid is too in great loss from last few years, and they just replaced CEO and COO (Bashir Tahir, Pervaiz Shahid) and now Zohair Khaliq, Naeem Zamindar joined.
    To provide good excellent servcies, companies have to adjust the tariff, charges, rates etc.
    PTA must play a role, as these telecom companies are contributing enough towards Govt taxes.
    Providing employement to a great number of people.
    As State bank restrict each bank not to charge below than a specific percentage.
    Restrict not to charge above than a percentage.
    Same PTA should play a role in adjustment of tariff, rates etc otherwise this could be critical for many employes as well.
    I heard that Zong has plan to reduce the head account up to 50% becasue they have reduced their margins.

    Being an employee,I expect that rate revision is justified instead of firing us.


  • In a country where a 3 rupee hike in fuel means the price of milk and vegetables go up simply should not have the cheapest cellular services you have ever seen. I see above that there are many people who see this charge as justified and I agree with them completely.

    Unfortunately, the consumer in this country just wants to complain to no end. All the people above who disagree with charge will never agree to a price hike in their favorite SMS Bundle or Night Packages(lover packages is what I call them).

    What the consumers in this country always fail to understand is the fact that the all the price hikes of fuel and its subsequent price hikes affect not only the telcos but every business in the country and people associated with it. So the telcos are well within their rights to levy this charge.

    Also one point I agree with from one of the comments above is the fact that you cannot run to business owners and complain about the taxes. Telephones are a basic necessity yet this nation pays 19.5% tax on using it. If they actually concentrate on reducing this stupid tax, the telcos will earn more. If they earn more, they will not levy these charges. If they don’t levy these charges the consumer would get better value for money.

    One thing that will still remain constant is the fact that the cosumer will still complain!! :)

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