Number Portability Likely To Thin Margins, Foster Competition: Rcom

[ravi_patent 28]

http://www.thehindubusinessline.com/2009/0...71451530400.htm

With the mobile number portability (MNP) expected to be launched between September 2009 and March 2010, the migration portends a squeeze on margins and dilemma on capex decisions between improving quality of service to retain customers and increasing the subscriber base at a time when the wireless service is on a rapid growth path. Number portability allows subscribers to retain their existing mobile number when they switch their mobile service provider.

Coming at a time when TRAI had, in a recent report, made adverse remarks about the quality of service (QoS) by telecom players, and the falling blended ARPU (Average Revenue Per User of pre-paid and post-paid categories), estimated at less than Rs 400 a month, MNP could contribute in putting pressure on margins by allowing frequent migration by users.

In an interview to Business Line, Mr S.P. Shukla, President, Reliance Communications, shares his views on the implications of number portability on the cellular operators. Excerpts.

The MNP is soon to become a reality. Could you briefly explain the implications of the dynamics of the system and the changes it will bring in the service?

Customers will be able to switch between operators for better QoS. Rather than continuing with price wars, service providers will start customer loyalty programmes, focus on renewal incentives, reduce hold times and work to improve network coverage. It is pertinent to say that Reliance Communications is the only telecom operator in India that has the advantage of operating in both GSM and CDMA space. Once MNP is implemented, we will be in the best position to leverage our dual-technology to offer customer the choice to shift from CDMA to GSM network and vice-versa.

With so many players in the field, will it alter the business models of the service providers?

The first beneficiary of MNP is the customer and subsequently the service provider. Customers are seeking a change of service provider for the sake of better value, better QoS — out of which a section of the customers also want to retain the number. Operators offering better value and better quality of service factors, such as network, billing etc, will stand to gain. Eventually, the market will attain maturity with QoS elements stipulated by TRAI gaining more focus among the service providers.

With general perception that MNP would pose a challenge to service providers in retaining customers, how does the sector expect to stem the churn rate, which is already 4 to 5 per cent?

The MNP will be a gateway for the Indian telecom industry to progress towards a new level of competitiveness. The current churn trend in the industry is due to lack of value to customers, quality of network, billing and customer hand-holding (Reliance’s churn rate is only 2 per cent). MNP will allow customers the flexibility of choosing service providers with ease, which might lead to an additional churn. However, the same will also entail improving QoS offered by operators, thus lifting any barrier to competition. Once again due to superior quality of Reliance Network on both the technologies — CDMA and GSM, we believe that Reliance Mobile will attract the biggest inflow of customers from other networks.

The industry is already contending with falling blended ARPU, with more than 50 per cent belonging to the pre-paid users’ category. How do companies expect to overcome the revenue shrinkage from say high usage post-paid customers?

Operators will compete to offer a better quality of service in the event of MNP rollout. Whoever offers better service will stand to gain.

Given the spectrum shortage that the key metro service areas face (which has a direct bearing on quality of service), a critical factor for subscriber migration, won’t the companies face a dilemma on capex decision between core technology absorption and service improvement, while customer acquisition and retention cost will be an additional burden.

The cost of MNP is in the form of a maintenance fee of the database of numbers to be borne by the service provider and the porting fee that has to be paid by the subscriber who wishes to change the operator. Service providers such as Reliance Communications has already invested in a pan-India 3G-ready network. The other service providers, who wish to match customer expectations, should be ready with a network with suitably similar capabilities. Customer acquisition and retention will be even more competitive with the real qualitative elements coming to the fore.

MNP is coming at a time when the growth rate in mobile subscriber base is rapid and when dismal reports of QoS are posing a challenge to operators in retaining customers. What will be the industry’s strategy to overcome the predicament?

MNP will lead to healthy competition among the service providers.

Do you see increasing ‘bundling’ offer, with even the handset subsidy becoming a norm?

Reliance Communications pioneered the concept of bundled handset offers — at a time when the handset prices were still high. Over the last few years, all the other operators have emulated the bundling offers we pioneered.

Edited July 14, 2009 by ravi_patent

[Greatest 55]

"MNP will lead to healthy competition among operators".... BULL SH**... Rcom is showing tht it is worried... ha ha..!!

[pasumark 51]

always the grass in the other side is greener. So when MNP comes we will all be changing the operator expecting something better. In India we have one of the lowest tariff's, but Quality? I often find when speaking in mobiles there is some problem in voice quality, either in my network(RCDMA) or the other network. This is common to all networks. We cannot say we have perfect network at all the places. When I call to BSNL,Airtel,Vodafone, Aircel etc all have this problem. So when MNP comes we have to keep the following points in mind before switching operator

* Whether the operator has good network coverage where we spend most of our time- like home, office etc

* Quality of customer care

* Value added service and their costs

* and finally tariffs

[Greatest 55]

^^^ very true ganesan... We should really see for the stuff mentioned above rather than just see the tariffs and follow suit...

[anshu_s09 18]

Agreed with u Ganesan

Aftr MNP it will not only be the tarrif which will attract customers of different operator.

bcoz even if we are paying half the call rate of other operator, and call use to drop then it dosent make any scence to go for lower taffri bcoz ultimately we will be paying more.

Newtork coveragre will certainly play important factor for a costumer migration from one opeartor to another