Hyderabad: Cellular Operators Association of India (COAI) today indicated that profits of the mobile telecom industry may shrink further on account of strict subscriber verification norms and levy of charges on erection of cell towers by the state governments, reports PTI.

Lack of infrastructure facilities in rural areas coupled with stringent norms of customer verification before providing services is a deterrent for mobile penetration in most parts of the country, COAI director-general Rajan S Mathews said.

Operators spend crores of rupees on customer verification process. Right now, activating one customer includes a minimum expense of Rs600-Rs700. Also, the state governments have started levying taxes on cell tower.

In Delhi, till recently they (state government) were charging Rs50,000 per tower. It has now further been enhanced to Rs5 lakh.

These are going to kill our profitability, Mr Mathews told PTI.

Some telecom operators are already incurring losses and the situation may further deteriorate with the new development, he said.

“Net margins are currently at 8%-10%. This may drop by 2%-3%. Some operators are already in the negative,” Mr Matthews said.

With the exception of a few companies, most of the operators reported dip in the net in Q2 this fiscal when compared to last year.

Bharti Airtel Ltd, India's largest mobile-phone operator, reported a 27% dip in net profit to Rs1,660-crore in the second quarter earnings.

Similarly, Tata Teleservices Maharashtra Ltd's net profit of Rs97 crore for the second quarter showed a decline of nine percent, compared to the Rs107.9 crore net profit it earned in the corresponding period last year.

Last month, the Department of Telecom’s (DOT) draft norms circulated in consultation with the home ministry had asked all mobile operators to re-verify the documents of over 70 crore mobile connections in the country.

Recently the Mumbai police revealed that 60% of prepaid SIM cards were procured using fake documents in the city.

The COAI suggested the government that the Unique Identification (UID) card should be set as benchmark for the customer verification.

“The government is trying to see what they can do. DOT and UID authority may coordinate in this regard for optimising the verification,” Mr Mathews said.

According to the data supplied by COAI, so far Rs1,50,000 crore investments have been made into the industry with a subscriber base of 700-million. India is one of the lowest-tariff countries.

According to analysts, customer acquisition cost, due to Mobile Number Portability (MNP), which is set to roll out from 25th November, is likely to rise as the acquiring operator (recipient) is unlikely to collect fees from the customer.

Edelweiss, a leading brokerage house (the recipient) will have to scrutinise the application and conduct the verification process for a cost.