In Saudi Arabia, where adherence to Islamic financial principles is paramount, the significance of a...
Debt collection is a critical aspect of managing finances for many businesses and organizations. Tra...
Debt collection is a vital aspect of managing finances for many businesses and organizations. The ke...
The COVID19 pandemic and its aftermath has increased pressure manifold on telecom companies to ensure that their customers stay connected. However, along with this increased pressure for companies to deliver services has come an increase in requests from customers to receive relief on their payment terms, as well as a significant increase in unpaid customer debt. Because of the above factors, the complex process of debt collections in the telecommunications sector has now become acute. But unfortunately, not only have many telecom companies entered the pandemic era with outstanding debt already on the books, but they still lack the required infrastructure to perform collections functions efficiently.
Why do debt collection issues exist in the Telecom Sector
Starting from the latter half of 1990s, the telecommunications industry underwent explosive growth due to newly emerging technologies and widespread deregulation. So naturally, during this period, the telecom industry focused almost completely on growing and retaining their consumer base, leading most large telecom companies to simply write off their debts. However, by the advent of the 2000s, increased competition and recession caused massive landslide like decline in this industry, because of which many companies couldn’t afford to improve their debt collections infrastructure. Added to this was the fact that, when compared to sales and marketing, investing in collections has generally always been on the back burner for many organizations. So, today, many telecoms are completely unprepared when facing the challenges of the pandemic.
What are the Most Common Causes of Telecom Debt
Although the causes of telecom debt are still evolving even as we write this, most of the debt can be attributed to a few main reasons:
Changing Economic Circumstances
For many consumers, unfortunately, the pandemic has vastly degraded their economic circumstances due to job loss. And this has the potential to escalate even more as the pandemic continues to impact the economy and cause further recession.
As mentioned above, during the high-competition years of the 90s, the telecom industry created a buyers’ market, with many carriers coming up with incentives to steal customers from one another. These incentives took the form of cut-rate plans, and some even paid off any early termination fees from the former carrier. Because of this, it has become quite common for consumers to change carriers without paying off the outstanding debt owed to a previous provider.
For many consumers, their outstanding debt is due to the higher bills they receive for overextending their service. Most, if not all, telecom contracts come with fine print that most users just purely neglect to read through and understand. A contract violation can sometimes result in bill amounts jumping by hundreds for an unsuspecting customer. Whether the decision not to pay is a moral objection due to feeling of being wronged, or simply the inability to pay a high amount they are unprepared for, either way, the bill stays unpaid. And anyway, due to the pandemic situation, many consumers are determined to stay in touch now, and decide to worry about the costs later.
Transient Nature of Wireless Services
Unlike landlines that are attached to the wall of a permanent residence, the very nature and appeal of mobile phones is that they allow their users freedom to roam. However, this ability to move from one physical address to another is how many consumers simply and innocently lose track of some of their bills. And then there are the other, dishonest consumers who use ever changing addresses to cover their tracks for trails of debt.
What are the challenges in telecom debt recovery
As it stands today the challenges and deepening recession trends present unique challenges for telecoms as they try to recover debt:
Threatening to terminate services is no longer an option
As mentioned above, changing companies is one of the most common causes of debt for telecom companies. But the same factor is also one of the reasons that companies cannot “play hard” during their recovery attempts. The main reason here is that the threat of turning off a customer’s service no longer carries any weight, as they will simply switch to another service provider. Also, given today’s climate of extending compassion to those who have faced/are still facing financial difficulties due to the pandemic, threats to cut off service at this time can be perceived as unsympathetic, and damage your company’s reputation.
Difficulties in locating customers
The fact that mobile phones allow their users complete freedom of movement from one address to another, it also automatically means that your company is always trying to keep up with changes of address. For other telecom services like cable TV for instance, most consumers change their residence as well as their service provider at the same time. Either way, a telecom company spends a significant amount of time and resources trying to track down payment. This trend will also continue to escalate as more and more consumers are forced to relocate due to the pandemic.
Restrictions on the Debt Collection Process
Apart from the above factors, there are legislations and regulatory pressures that are designed to apply restrictions on the debt collections process. These regulations limit the use of artificial or prerecorded voice messages, automatic dialing systems, and SMS text messages. In most jurisdictions now, it’s also required that all automated IVR calls for telemarketing or informational purposes made to a wireless phone MUST have the consumer’s express consent.
So how do telecom companies collect outstanding debts
Looking at the above reasons, it may appear that collecting telecom debt is a difficult and cumbersome (even hopeless!) process. To be honest, it can be, but with the right approach, companies do, and can recover their debts, while still retaining customers. How? See below…
▪ Training and compliance
Personnel collecting debt should be trained and certified to do so. They must be familiar with laws and regulations surrounding consumer data security as well as debt collection practices.
▪ Immediate response
Time is of the essence when collecting debt. Companies should do the following, as quickly as possible:
✓ Ascertain if the debtor is deceased or bankrupt
✓ Attempt to locate consumers with expired contact information
✓ Work with vendors to attain the most recently reported address and credit scores
✓ Immediately generate and mail Demand Letters
✓ Client Segmentation
From the above article, it is amply clear that the telecom industry today is faced with the perpetual challenges of very high volumes of low-value consumer debt. As a starting step for resolution, companies can optimize their valuable time and resources by segmenting consumer portfolios based on the validity of contact information or credit scores.