Unregistered prepaid clients switch off? No business sense.

It is coming the day when the Spanish telecom operators will have to disconnect all pre-paid mobile cell phones unless the owners are registered. Just for those that are unaware of this, let’s explain a little bit the policy: In an attempt to prevent terrorists and criminals using anonymous prepaid mobile phones for communication, the Spanish government issued a decree to disconnect any un-registered phones in the operator’s networks.

The campaign was called “Identifícate” and intended to get the country’s estimated 20 million prepaid mobile phone users to register. The deadline is November 7 2009, after which phone operators will be instructed to switch off service to those who have not provided proof of identity.

It’s not clear what will really happen; According to the Spanish publication “El Mundo”, there are still 9 million subscribers pending registration. Let’s make a simple calculation of what does this mean: according to MarketResearch.com the Spanish monthly average ARPUs will continue to decline across operators. The industry average monthly ARPU will fall from €29.62 in 2008 to €20.05 in 2013 so we can roughly assume that the ARPU in 2009 can be positioned in the €25. Considering a total amount of 8 million clients stopping consumption in November, that means that the Spanish operators will stop generating 200 million Euros / month in November and so on…

Will operators accept loosing this relevant amount of money? How are they going to replace this revenues? How will prepaid users coming from other countries to visit Spain be treated? Does this really make business sense?

I had a similar case when we were working in Sudan for one of the mobile players. The government also required the deactivation of the unregistered prepaid clients for security issues. It was clearly stated that this requirement significantly hurt our client that strictly followed the policy affecting to near a 40% of their base. I have to say that we recommended not doing so, as the financial and market-repositioning impact was so big that we would require no less than a year to recover.

Now the personal part. I know that the law is the law, but I guess that no-one in the government level have dedicated one single minute to think seriously about this. This move will doubtless please the authoritarian “nothing to hide, nothing to fear” brigade, however it’s another major blow against the right to privacy and the presumption of innocence. Yes, cellphones can be used by criminals and terrorists. As can the postal service and – for example in London – public buses. Should letters only be delivered if an authorised sender id is attached? Should we have to provide identification every time we board public transport?

Taking out the more-than-relevant financial issues that all players will suffer as a result of such a decree, a move such as this is not only a direct threat to privacy, it reverses any assumption of innocence. If you don’t register your phone you must be up to something so you’ll be cut off. At the moment this is purely a Spanish issue, but how long will it remain so? The British government in particular have a record of justifying attacks on privacy using the fear of terrorism and the argument that “Everybody else is doing it”. Watch out for something similar coming soon in legislation near you…