Lies, Damn Lies And Mobile Phone Subscribers
By Mike Masnick, Thu May 05 21:15:00 GMT 2005

More operators admit that subscriber numbers were inflated by inactive prepaid accounts, highlighting how people are focused on the wrong numbers again.

The not very well-kept secret of mobile phone subscriber numbers is that they're often inflated beyond reality. The easiest way to inflate such numbers is by counting all prepaid customers, even ones who are clearly inactive. Last year, some people finally started to re-evaluate subscriber numbers, knowing that deals for new customers often meant that it was smarter for prepaid users to just open a new account, rather than to top-off and use an old one.

Over in Australia, Optus has finally shed some light on the practice, admitting that they were overstating subscribers by a wide margin. In effect, the company is doing a write-off of subscribers it never really had. It's really no different from a company that re-states its financial results after it comes to light that the numbers were fudged in some manner. What surprised some, however, was the extent of this practice within Optus. The new numbers cut 369,000 customers, and suggest that Optus isn't doing nearly as well as many had believed.

What it comes down to, however, is the fascination with presentable numbers, rather than real metrics of how a business is doing. While the fault ultimately lies with Optus, for choosing to inflate the numbers (and even now, in revealing the level of the inflation, they do so defensively), it's easy to also blame over-anxious investors who cling to ever bit of numerical data, rather than looking at the overall health of a business. It's this same numerical infatuation that makes operators concentrate way too much on ARPU as well.

The numbers are important in recognizing how a business is doing, but valuing the numbers over the actual success of a business leads to bad short-term decisions which can destroy a business in the long term. The practice of inflating subscribers based on dead prepaid accounts is just as bad, if not worse, than the practice of newspapers inflating subscription numbers -- but the response has been much calmer. With other companies making decisions based on the size of the market and investors making buy and sell decisions based on bogus numbers, the overall effect is a dangerous house of cards. Companies always want to make themselves look good, and when their competitors are pulling certain tricks, it's tempting to do the same. However, being honest about the real condition of your business is going to help in the long run by building up more trust, and a stronger ecosystem for the entire industry.