MNP clincher is value, not discounts

Guillaume Sachet and Tan Li Yu/Accenture
19 Jun 2008

Several countries are set to launch mobile number portability, with Singapore scheduled on last week, Malaysia in August and India soon after.

As we were looking at countries preparing for MNP, we were wondering whether we can predict what will happen to those markets once MNP is "live". A recent forum in Singapore made us wonder how rational a MNP market can be.

As we usher in the age of digital convergence, the need to "stay connected, anywhere, everywhere" has led to the transformation of the mobile phone from a simple communication device to a personal digital side-kick that people cannot leave home without. Such is the intimacy that a person has with his mobile phone that the phone number has become the person's identifier: lose the number and you lose your identity. It is this same reason why MNP has the power to cause ripples within a country's telecom industry.

MNP is traditionally used by regulators to stimulate competition as it provides the ability for a person to retain his mobile number when he switches from one telecom operator to another.

Looking at historical data from Accenture and Ovum, we came up with the following observations. First, porting statistics are difficult to predict. The most direct impact of MNP is increase in churn levels as subscribers who previously refrained from churning for fear of losing their number are now all at risk of switching to another operator.

However, it is impossible to determine the level of porting that MNP will generate. In Finland the initial estimate for monthly porting volume was 10,000 ports per month. In the first month, there were 60,000 ports and the highest porting volume attained was over 200,000. In Australia, the regulator had planned for one million ports within two months but this was achieved in 20 months.

Second, there is no clear winner despite traditional thinking that incumbents will lose most and that smaller players tend to benefit most from MNP. This is true in the case of Japan where MNP served to open up a window of opportunity for market leader NTT DoCoMo's competitors KDDI and Softbank. KDDI benefited the most from MNP by focusing on its popular mobile data services and heavily subsidized attractive handsets.

The battle begins

In Hong Kong, however, the smaller players paid a heavy price for MNP as the regulator voided all existing post-paid contracts, resulting in a major price war.

Third, ARPU decline is not a fatality since in many countries facing MNP, ARPUs are declining. A more thorough analysis, however, reveals that ARPUs are already declining prior to MNP. This was the case in Australia in 2001 as it is the case in Singapore today. More importantly, we observed that Optus' monthly ARPU grew 13% the year after MNP - up from A$55.90 (around $53.72 today) in 2001 to A$63 ($60.54) in 2002.

People's behaviors in an MNP context are not rational. We observed divergent behaviors as far as MNP is concerned. One is that people who have been locked in with an operator for a long time have developed a perception of their operators (good or bad) and MNP will reinforce this perception either by pushing them to another operator or to affirming their loyalty toward an operator.

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