Indian Telecom Story (Part XXXVI): Mobile Number portability dawns!
The key word here is FINALLY. After years of being pushed and lobbied against Mobile number portability finally becomes a reality on Indian Soils. So whats changing?
Is the MNP a bug bear or will it see huge churns?
There are arguments and numbers both in favour and against. Analysts estimate the rate of subscriber churn at 6-8% among pre-paid subscribers, who make up nearly 95% of India’s 700 million mobile phone connections, and 1-3% among post-paid subscribers. The 5% subscriber base of post-paid subscribers contributes about 20% of revenues for larger telecom players. That’s the prize money various mobile operators are going to fight over — to win the post-paid subscribers.
Sample This: Hindustan Times – MaRS in a report have painted a dooms scenario for a few of the operators. According to this survey 17.6% or an estimated 120 million users (of the 700 million base) will want to switch. Two of the old timers, Airtel and Vodafone are expected to count windfalls where as BSNL and the CDMA houses are expected to loose subscribers!
The test market, Haryana, where MNP was introduced 2 months back hasn’t however shown any huge blip in terms of churn. Just about 1,40,000 out of 19 million subscribers in Haryana (1% users) have switched their operators, according to the Telecom Regulatory Authority of India.
Telecom operators are already developing specific retention strategies wherein key customers will be offered incentives to stay on. Deep discounts would be offered to high value customers who would want to change operator.
CDMA operators (Reliance and Tata Tele) are expected to be the big losers as users may side up with the incentive to move to GSM comes from a wider choice of handsets as well as service providers.
How does it effect the Operators?
MNP is expected to cause a near-term increase in S&M (sales and marketing) costs, network expenses, and churn rates. However, meaningful proportion of corporate subscribers moving from incumbents to new entrants would not possibly happen. Operators are likely to respond by bringing down post-paid tariffs, which are currently about 25% higher than pre-paid call rates. The boldest move yet has came from Loop Mobile, a regional operator in Mumbai, that went beyond the talk by offering to compensate subscribers for every dropped call. Such post-paid tariff reduction could put Telco earnings at risk by a factor of 5-8%. MNP is likely to increase the cost structure of all the players as they will need to spend more on improving their quality of service and customer care. Measures, to both attract customers and retain customers take its toll on profitability of Telcos given that tariff levels are already extremely low. Under such a scenario, telecom operators with stronger financial profile would be better placed to cope with the increasing competitive intensity