Will Churn Burn India's Mobile Operators?
That doesn't mean it's being introduced by the latest deadline of March 31, though. The operators still aren't ready, and a new deadline will be announced soon, reports The Economic Times. July 2010 now looks like the earliest possible timeline.
But whenever MNP is finally available, what impact will it have on the market, where current churn rates run at 3 to 4 percent?
While it will allow India's mobile users to switch service providers and retain their existing phone numbers, the introduction of MNP is unlikely to result in a significant change in customer churn levels, according to industry analysts and operator executives.
"The experience from other developed markets suggests that the spike could range from 0.05 percent to 0.3 percent and last between six to nine months," says Neeraj Jain, director, Transaction Services, at KPMG International .
The main reason for the conservative outlook is that the quality of service and prices on offer from most of the main service providers are very similar, giving users little reason to change provider.
That may give the Indian mobile market's new entrants a chance to make an impact, as they can promote the enhanced service quality that comes with an uncongested network as their unique selling point.
But even the new entrants aren't expecting excessive churn when MNP is introduced, though they're hoping to attract some high-end customers.
"We can only look forward to getting more people on the network because subscribers would like to use better quality of service and maintain their old mobile numbers as well. We see more churn happening on the higher end of the segment in the urban setting, which we want to capture," says Rajeev Batra, CIO at CDMA operator Sistema Shyam TeleServices Ltd. , which operates under the brand, MTS India.
But MNP is unlikely to lead to a "dramatic shift in the market. If you see in the U.S. the churn was only 5 percent, and in Pakistan much less than that. We can expect a similar churn in the Indian market as well," says Batra.
Uninor is another new entrant that isn't expecting much churn.
"In the beginning it might result in a gain for the new operators, but in the long run consumers will stay with an operator who makes them happy. It is not going to result in a major churn in the market," Rajiv Bawa, executive vice president, Corporate Affairs, at Uninor, tells Light Reading. (See Interview: Rajiv Bawa, EVP Corporate Affairs, Uninor, Telenor Invests More in Uninor, and India's Uninor Adds 1.2M Subs.)
The greatest impact might be seen in the minority post-paid subscriber (or high end) sector, which accounts for fewer than 10 percent of India's 500 million-plus mobile connections. Those are precious customers, though, and the operators will do everything they can to hold on to them.
"With the launch of MNP, the incumbents are going to place greater focus on offering differentiated service to retain high ARPU customers. Such differentiation may be driven by bulk discount on usage, free handset rewards, attractive loyalty programs, unlimited on-net plans, and so on," says KPMG's Jain.
Lessons from Pakistan
The Pakistani market is similar to the Indian market in many respects, with low ARPUs and a high number of operators.
MNP was implemented in Pakistan in 2007, and the impact "was minimal, with a churn rate of less than 1 percent," says Sultan Ul Arfeen, the chairman at CDMA 1x-based wireless local loop service provider TeleCard Ltd. "The tariff war had ensured that the rates offered by the operators were similar, thus there was no obvious reason to move from one to another."
But there is one major difference between Pakistan and India -- the cost to the consumer of switching service provider.
In Pakistan the original tariff was the equivalent of 500 Indian Rupees (US$10.96), later reduced to INR250 ($5.48), though that cost is most often swallowed by the service provider gaining the new customer, which gets to retain the new user for a minimum of six months.
In India, though, the cost of switching providers under MNP is fixed at just INR19 ($0.42), a low price that shouldn't deter anyone wanting to make a change.
In addition, the widespread availability of competitive 3G services should come to the Indian mobile market shortly after the introduction of MNP, and with only a very few blocks of 3G spectrum available, the operators that prevail in the spectrum auction and are subsequently awarded a license might attract customers from other networks. "3G might turn out to be a trigger point for subscribers to move from one operator to another," says Kamlesh Bhatia, a principal analyst at Gartner Inc. (See India Sets New 3G Auction Date.)
The main long-term impact of MNP in India could be on the operators' willingness to focus more on the quality of their service and their customers' experience. Indeed, in advance of MNP, Tata Teleservices Ltd. has introduced a "Customer Service Charter." (See Tata Shows It Cares .)
"After a spike, churn is expected to stabilize as operators focus on quality of service and customer retention," says KPMG's Jain.
TeleCard's Arfeen agrees. He feels the only positive benefit of MNP implementation in Pakistan was that the operators were forced to focus more on quality.
With MNP set to be introduced in the coming months, it's just possible that the Indian operators, which until now have been totally focused on building their subscriber bases, might turn their attentions to customer retention strategies, too.
— Gagandeep Kaur, India Editor, Light Reading