MNP to hit big firms: Analysts

May lose high-revenue-yielding subscribers; but users to benefit.

Introduction of mobile number portability (MNP) may be good news for consumers but is likely to hit the existing operators on account of shifting of high average revenue per user (Arpu) users to new players, say analysts.

“MNP will have a negative impact on incumbent GSM operators like Bharti Airtel, Idea Cellular and Vodafone-Essar in the near term due to loss of high-Arpu customers to new entrants or dual-technology service providers like Reliance Communications, TataDoCoMo and Uninor, who have little to lose after MNP,” Religare Hichens Harrison Analyst Himanshu Shah said.

In India, with declining tariffs, increasing competition (given that there are 12-14 players per circle) and commodified voice as the prime product, the service quality was typically poor, which would induce customers to change their service providers, he said. Consequently, incumbent GSM operators with a wider subscriber base remained vulnerable to new entrants due to spectrum paucity, he said.

The porting charges, fixed at Rs 19 by the Telecom Regulatory Authority of India (Trai), are likely to intensify competition in India’s already crowded telecom industry.

Echoing similar views, Citigroup said in a report that the charges, at Rs 19, were lower than expected and would prove to be negative for incumbents.The lower-than-expected porting charges may put pressure on post-paid tariffs, which contribute about 15 per cent to the wireless revenues of large incumbents.

High spenders and post-paid and business subscribers showed a greater tendency to switch if MNP was introduced, Nielsen Executive-Director (telecom practice) Shankari Panchapakesan said. Post-paid subscribers had almost double the minutes of usage than pre-paid subscribers, he said, adding that incidence of data application usage was also higher among post-paid users and high spenders.

MNP has been successful in like Hong Kong, Japan, Australia, Norway and Denmark, but it has generated a lukewarm response in the US, the UK and Pakistan.

The porting charge has been arrived at using a 15 per cent return on capital employed, with the churn rate estimated at 15 per cent for the first 15 months and 7 per cent, 6 per cent and 5 per cent for the successive three years, respectively, according to Citigroup.

The charge was expected to be in the range of Rs 100-150. It be paid by the consumer to switch his service provider.

Panchapakesan said introduction of MNP was good news for consumers but a threat for mobile operators.

According to a mobile consumer insight study by Nielsen, it is estimated that close to one in five (18 per cent) Indian mobile phone subscribers will change their mobile operators after introduction of MNP.

“MNP represents a powerful opportunity for operators to drive in-bound porting of high-value subscribers, provided they have a good understanding of who is more likely to switch and why,” he said.

However, incumbent players say they do not see subscribers moving out. A senior executive of a leading mobile service company said, “Why should our subscribers move. We provide them a pan-India coverage, unlike the new players who are present only in a few circles. Our tariff is the same and our network is better because we have made major investments over the years to ensure subscribers get proper coverage indoors, unlike the new operators that are putting in a few towers.”