Is MNP a game changer?

Fri, 3 Dec Pre-Open

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Mobile Number Portability (MNP) has been introduced in India in a phased manner. By virtue of this, subscribers can now change their service provider while retaining their mobile numbers. This service is now available in Haryana. The rest of India would be able to enjoy it from January 20th next year.

At this point of time we will try to analyze the impact MNP would have on the companies. MNP usually impacts 2 things. One is the churn rate, i.e., number of subscribers leaving one network for another. The second is the marketing spend of the operators.

MNP is generally viewed as beneficial for customers who are disgruntled by their service offering. These are usually the prepaid subscribers who are either looking for better pricing plans or are changing their operator just to avail a particular scheme. While post-paid subscribers may also be interested in better pricing plans, historically the churn in this segment has been much lower. One of the main reasons for this is the general inertia of the postpaid subscribers when it comes to changing pricing plans. How many of us (who are postpaid subscribers) even know what our pricing plan is? Therefore, it is generally seen that MNP affects the prepaid subscriber base in a more significant manner.

It is interesting to note that in India nearly 93% of the total subscriber base consists of the prepaid segment. While this segment is most prone to switch operators when MNP is introduced. However it may not really change the market dynamics in a big way. The annual churn of this segment already stands at a whopping 40% (approximately 6-7% monthly churn). Therefore, it is not expected to rise materially once MNP is introduced.

While it may not change the dynamics, however, operators would still vie to attract customers from competing networks. Similarly, they would also concentrate on retaining their existing customers. For this, they would need to spend on advertising and marketing. On this front, many operators have already started advertising their better networks and better service offerings. We have all seen Idea Cellular’s ads that are doing rounds on every national television network. Therefore, there may be an increase in advertising and marketing spend for the operators. However, over a period of time, once MNP loses its novelty, these costs tend to normalize.

But we ask ourselves, is one operator’s network really better than the others’? Are the service offerings really that different from each other? The answer to this is somewhat ambiguous. Telecom networks in India are more circle specific now. While one operator may offer better network services in one circle, it may not be the best in another circle. Again, pricing plans and service offerings are also subscriber specific and at times circle specific. It would do be better if subscribers clearly weighed these things before switching operators. Switching just for the sake of it may not be worth it. After all there is a cost involved in that as well.