MNP to have limited impact on operators

Mobile Number Portability (MNP) is unlikely to have significant negative impact on operators in India, according to Fitch Ratings, a USA-based ratings agency.
This is because the telecom market in India consists largely of pre paid subscribers and already experiences a high rate of churn, even without MNP. Annual churn rate in the pre paid segment is 50-70 per cent; while it is only 12-24 per cent among post paid subscribers.
With the roll out of MNP, it is possible that competition in the post paid segment will now intensify.

The post paid segment delivers approximately 40 per cent higher average revenue per minute (ARPM) than the pre paid segment does. However, as this segment represents not more than 5 per cent of total wireless subscribers, Fitch anticipates that the impact of increased costs caused by efforts to retain existing post paid subscribers and acquire new ones will not affect over all operator margins much. These costs will increase over the following year, but will normalise over the medium term.
The agency also expects post paid subscribers to be somewhat more loyal to strong brand names of leading players, and hence unlikely to switch operators for minor pricing reasons, particularly considering that the differential in mobile calling expenses would be negligible as a percentage of subscribers' disposal income.
Nevertheless, Fitch expects pricing pressure, which has so far affected the pre paid segment more, to now affect the post paid segment as well, albeit to a lesser degree.
This pricing pressure will make it possible for new and small wireless operators to compete with leaders in the post paid segment.
The Telecom Regulatory Authority of India announced details of MNP in November 2009, and stated that the porting charge paid by the subscriber to the recipient operator would not exceed Rs 19. Even though this is only 10-20 per cent of current average revenue per user (ARPU), operators can choose to charge a lower price.
The per port transaction charge, which is paid by the recipient operator to the MNP service provider, has been decided at Rs 19; while dipping charges, paid by international long distance (ILD) operators to MNP service providers, are to be decided mutually by the MNP service providers and ILD operators or access providers. The regulator initially set porting time to a maximum of four days, but has now extended this to seven days, except in Jammu and Kashmir, Assam and the North-East, where it can be 15 days.
The implementation of MNP in India, originally scheduled for 2009, will be carried out in a phased manner starting with Haryana and covering the entire country by 20 January 2011.
So far, the impact of MNP in Asia Pacific has been between moderate and low. While competition intensified in Malaysia and South Korea after MNP was implemented in those countries, it had little impact in Singapore, Japan and Taiwan. In South Korea, MNP led to higher marketing expenses due to an entirely post paid market with low annual churn rate of 12-24 per cent.
In Malaysia, the second largest operator aggressively snatched some of the largest operator's market. However, the impact of MNP was low in Singapore due to limited tariff cuts by any operator; and it was low in Japan and Taiwan due to high porting charges of 70 per cent and 30 per cent of ARPU, respectively. Overall, Fitch expects the impact of MNP in India to be limited, considering that ARPM is already at rock bottom (about Rs 21), and considering that India has a high churn rate since more than 95 per cent of the market consisting of pre paid subscribers.
As of September, Bharti Airtel was earning 31 per cent of total telecom revenue in India; followed by Vodafone Essar with 21 per cent; Reliance Communications which gathered 14 per cent; and Idea Cellular with 13 per cent. The 21 per cent of total telecom revenue that remained was divided among Aircel, STel, Virgin and MTS etc.