Mobile number portability may not be a game changer for the industry, but it could affect margins of mobile operators trying to lure subscribers with free talk-time
The much-touted and awaited mobile number portability (MNP), which allows a subscriber to change the operator while keeping the same number, is turning out to be just a ‘feel good’ facility, or what is termed in medical terminology as 'placebo', a simulated medical intervention that can produce a perceived improvement.
Although the initial euphoria for MNP is still there, its impact so far has been lacklustre and it may not be a game changer for the telecom industry. According to a PTI report, based on the daily MNP figure reported by telecom service providers, there has been request from over 11 lakh customers to switch from their existing network. This is just 0.15% of the total mobile subscribers in the country.
While the subscriber may feel that, s/he has now got rid of a troublesome operator through MNP, which would be the placebo effect, there could be different issues with the new operator.
"Our initial survey to ascertain the likely impact of MNP post implementation leads us to believe that our early thesis has been ratified. We continue to believe that MNP may not be a game changer, as subscriber switching will be restricted between a few service providers, but it could impact margins as customers are offered more bang (minutes) for the buck," Edelweiss Securities Ltd said in a research report.
Mobile operators in the Mumbai circle are offering free talk-time for post-paid subscribers, mainly to reduce the churning due to MNP. Bharti Airtel is offering 15,000 seconds or 250 minutes talk-time free on a rental of Rs249 per month. Vodafone is offering 12,000 seconds or 200 minutes on a rental of Rs299 and 800 local minutes free on a rental of Rs399 per month. Idea Cellular, one of the late entrants in the lucrative Mumbai circle, is offering more free minutes in order to grab more subscribers through MNP. Idea is offering 400 minutes talk-time free on a rental of Rs179 per month.
Interestingly, state-run Mahanagar Telephone Nigam Ltd (MTNL) and Bharti are waiving all charges, including the Rs19 porting fee, SIM card charges and activation fees. Idea, on the other hand is collecting Rs19 as porting fee and Rs99 for SIM card and activation from new subscribers who are porting their connection.
Although the exact number of subscribers who have changed their operator through MNP is not available, according to a report in the Business Standard, Idea has been the biggest gainer and Reliance Communication (RCom) has been the biggest loser so far. In the Mumbai circle, Idea has already got 12,300 subscribers through MNP, while Vodafone has 11,252, Bharti 94 and Aircel 3,389 subscribers. RCom is said to have lost 9,645 subscribers, the newspaper reported.
MNP is beneficial for both post-paid and pre-paid subscribers and analysts suggest that the lower porting charge would give a further impetus to prepaid churn. “The TRAI-notified porting charges (PC) is lower than our and the industry’s expectations and this would boost higher uptake of MNP from the low average revenues per user (ARPU) segment, mostly prepaid subscribers, leading to higher churn rates from the current 4.5%-8% per month, at least in the short run,” Anand Rathi Financial Services said in a report.
Of the total number of mobile phone subscribers in India, only 5% are from the post-paid segment. Interestingly, it has been revealed that out of the estimated 70 crore subscribers, 70% are active users.
According to data from the Telecom Regulatory Authority of India (TRAI), industry post-paid tariff is about 80% higher than pre-paid tariff. This could be one reason for post-paid subscribers to go in for MNP. Other reasons why subscribers are changing the operator are poor network quality, high tariff and poor quality of customer service.
Fitch Ratings expects pricing pressure, which so far had been on the pre-paid segment, to spread to the post-paid segment after MNP, although to a lesser extent. In addition, new entrants and smaller wireless telecoms will get a stronger chance to compete against incumbent leaders in the post-paid segment where the annual churn rate is only 12%-24% compared to 50%-70% in pre-paid, the ratings agency said.
Standard Chartered Securities (India) echoed this in a note, saying, "MNP will have an impact on post-paid tariffs, however, the overall impact will be limited given that post-paid is 12%-18% of total revenues. Given the greater stickiness of post-paid and the 3G 'promise', the incumbents may not be required to match the tariff offers completely. Scattered 3G distribution will also make it difficult for other 3G players like Tata-Docomo and Aircel to make a broad-based impact."
Few operators have seen any noticeable change in the area of corporate subscribers. According to Edelweiss, corporate customers believe MNP will not make them change a service provider. However, they are expecting attractive schemes as far as 3G services are concerned. "Within 3G services, it is mainly internet access which corporate customers believe will be of some interest, while video calling is not expected to be a key area of interest. Also, on 3G services there is limited activity that corporates have experienced from their service providers, indicating that there is still some time for 3G services to be launched in Mumbai," the brokerage added.
While the initial euphoria associated with anything new is still there for MNP, according to information there is no significant change in the subscriber market share of operators. Although operators are trying to woo subscribers with many offers, they may not be able to sustain this given the costs associated with the 3G rollout and proposed changes in the new telecom policy (NTP-2011).
The recently announced framework for NTP-2011, or auction-based spectrum allocation, could impose a further burden on the new entrants, currently stuck at 4.4MHz. While incumbents would also have to shell out more for excess spectrum beyond 6.2Mhz, the impact might be offset by the proposal to replace the slab-wise spectrum charge, currently at 3%-8% of adjusted gross revenues (AGR) for 4.4Mhz-15Mhz with an uniform revenue share irrespective of spectrum held.
TRAI is likely to recommend the modalities of new spectrum pricing norms and spectrum charge, after which the policy is likely to be finalised.
The domestic retail sector has the potential to grow to a $260-billion market. But with haphazard planning and bad governance, availability of land has become a big issue
Lack of availability of space for retail locations has emerged as a big issue. According to a white paper published by The Boston Consulting Group, by 2020, the Indian organised retail sector will be worth a whopping $260 billion, and will be contributing $25-30 billion more to the exchequer than what it is doing today.
But if the real estate sector continues to be what it is today, one may happily forget the figures.
Speaking at the CII Retail Summit 2011 held in Mumbai on 2nd February, Kishore Biyani, Group CEO of Future Group said, "Yes, the retail sector will grow to a $260 billion mark, but that is if we get the requisite space. In order to achieve that mark, we need 200 to 300 million square feet (of) space." But how easy would it be to get this kind of space? If we go by some experts, things are not going to look up.
A senior executive of a real estate service firm (preferring anonymity) told Moneylife, "With haphazard planning and bad governance, availability of land has emerged as a big issue. Especially, if one is seeking a large area, like that for a big retail outlet, it becomes more problematic", he said.
Anuj Puri, chairman & country head of Jones Lang LaSalle India, also agrees that for retailers, space will become a problem. "[The] government must be transparent about its policies. In the last five years, no real estate investor has made money. People say that foreign direct investment will solve the problem, but I don't see how. Even with extra investment, be it domestic or foreign, we don't see the consumers getting any profit. Prices have risen and risen."
Due to unplanned growth in many places, land distribution has been done is an arbitrary manner. Many retailers have complained that due to the scarcity of land, they have had to settle for weird designs and inconvenient structures.
Also, the government prescribes that all retail spaces should be over 50,000 sq ft, regardless of their location. As a result, in upcoming urban areas, a retailer is saddled with maintaining a large area which is not profitable at all.
"The only thing that can be done at this point is to talk to the builders and dealers about the structures", said Mr Puri. "If the retailers and the builders sit together and chalk out a good plan, they can make the most out of the space they have got. That itself will make a good start. As for the rest, you must wait and watch."
Prime minister Manmohan Singh said that introduction of competition, greater choice and modern technology could cut down the opportunities for corruption in a very meaningful manner
New Delhi: With his government under attack over various scams, prime minister Manmohan Singh today spoke out against corruption, saying that it strikes at the roots of good governance, dents the country's international image and "demeans us before our own people", reports PTI.
"This is a challenge which has to be faced frontally, boldly and quickly," he said addressing the annual conference of chief secretaries of states here.
He said, "Corruption strikes at the roots of good governance. It is an impediment to faster growth. It dilutes, if not negates, our efforts at social inclusion.
"It dents our international image and it demeans us before our own people," Mr Singh said.
Referring to the Group of Ministers (GoM) headed by finance minister Pranab Mukherjee and set up recently to look into all measures, legal or administrative, to tackle the menace, he said two bills have already been introduced in Parliament relating to judicial accountability and the protection of whistle blowers.
"Along with legislation, the necessary revamp of administrative practises and procedures needs to be fast-tracked. A systemic response that reduces opportunities for corruption needs to be put in place," Mr Singh said.
Serious concern has been expressed in many responsible circles about the lack of ethical conduct and probity in public life, he added.
The prime minister said that the introduction of competition, greater choice and modern technology could cut down the opportunities for corruption in a very meaningful manner.
Delays, another major cause, could be addressed to a large extent by effective decentralisation and delegation of power and responsibility, he said while seeking the support of top bureaucrats in bringing about vast improvements in governance.