Mobile number portability delayed due to the 3G auction?

Industry experts feel that the implementation of MNP will not take place before the 3G auction. This will help certain mobile operators to upgrade and prevent high-value subscribers from migrating

For all those waiting eagerly to change their mobile service provider (MSP), here is some bad news. Mobile number portability (MNP), which was supposed to come into force from 1st January in the Metro and category A service areas, has been delayed till the new fiscal year.

According to a circular issued by the department of telecom (DoT), the government has decided to extend the timeline for MNP implementation for the whole of the country in one go by 31 March 2010.

However, there are certain doubts being raised due to the delay. The government was scheduled to issue the notice inviting applications (NIA)—a legally binding document containing the details on the slot—on 8 December 2008, as per the original third-generation (3G) spectrum auction. Due to non-clarity on the spectrum availability, the NIA document is now expected to be issued by 7th January.

What has the auction of 3G got to do with MNP? There are two points—first, only those MSPs with strong balance sheets can dare to go in for the auction process; second, it will allow these MSPs to upgrade and thus retain existing high-value subscribers from migrating to other MSPs.

"We believe that Bharti Airtel would benefit if 3G auctions were to be held before the end of FY2010 in the scenario where regulators are talking about the possibility of delay in the rollout of MNP,” said brokerage Sharekhan Ltd, in a report.

The research report said, "Our view stems from (1) the risk of over-payment for the 3G license would be low given the weak balance sheet position of other telecom players and availability of four slots in a circle, and (2) Bharti would be in a better position to protect its post-paid and high-usage pre-paid subscribers if 3G network rolls out before the rollout of MNP. Further, this could help Bharti to protect its revenue and subscriber market share due to lower churn of high value customers by moving to the 3G network."

The government wants to complete the process before the end of this fiscal year as it feels there is a possibility of lower auction proceeds owing to weak balance sheet of MSPs, the ongoing tariff war and low interest of new entrants in the process. The government may find it difficult to garner its estimated Rs35,000 crore from the 3G auction. 

The 3G auction is expected to be crucial for the Indian government, as it would help it manage its current year fiscal deficit. Moreover, every six months of delay in the auction process translates into a loss of revenue to the tune of $1 billion for the country's economy.

Earlier, the Telecom Regulatory Authority of India (TRAI) had fixed 31 December 2009 as the target date for implementing MNP in Metro and A category circles and 20 March 2010 for B and C category circles.

However, after meeting with MSPs, DoT said that it found that while some of the access (basic/mobile) and international long distance (ILD) service providers have technically upgraded and augmented their networks and some have established physical links with MNP operators, others are still in the process. Since these are all time-consuming processes, the concerned MSPs are being given a timeframe by DoT for various activities, it said in a circular.

MNP allows subscribers to retain their existing mobile telephone number when they move from one access provider to another, irrespective of the mobile technology, or from one cellular mobile technology to another of the same access provider, in a licensed service area. This means a CDMA subscriber can opt for a GSM service provider and vice-versa.

With the implementation of MNP, many believe that there would be a higher churn among subscribers. The global experience in MNP is somewhat mixed with reported churn levels between 0.1%-31.9%. Surveys conducted by market research organisations have predicted that the porting rate will be between 10%-20% for pre-paid subscriptions, and up to 50% for post-paid subscriptions.

Even sector regulator TRAI, while calculating the per port transaction charge, has estimated 10% porting rate for the first 15 months and thereafter 7%, 6% and 5%, respectively for successive years.

"We believe MNP would have a higher impact in Metro and A circles, especially the post-paid subscriber base as pre-paid churn is already high. Tata Teleservices and Vodafone have relatively higher exposure to Metro and A circles. However, Tata Teleservices is likely to benefit from MNP given its recent entry into the GSM segment which has the majority of high average revenues per user (ARPU) early customers. We believe Vodafone will feel the maximum impact of MNP among pan-India operators. Operators like MTNL and Loop which are only present in metros would be impacted the most," said Motilal Oswal Securities Ltd, in a research report.

According to the TRAI notification, subscribers changing their service providers will have to pay Rs19 as porting charge to the recipient operator. However, TRAI has said that operators are free to charge any amount lesser than or equal to this charge. This would prove to be another headache for mobile operators, already reeling under pressure due to the tariff war. Many operators may provide this service free of cost in order to increase subscriber base.

Speaking about the low portability charges and their impact, Motilal Oswal Securities said that there would be three outcomes. First, the recipient operator would incur minimal cost if it foregoes the 'per port transaction charge' (Rs19), thus allowing subscribers to change their operator while retaining the number without any financial burden. Second, subscriber retention cost will increase and tariff wars are likely to intensify, and third, the process of industry consolidation would likely get accelerated further.

Syniverse and MNP Interconnection are the two operators selected to implement MNP services in India.

While MNP implementation and new launches could lead to some further market disruption and cause an increase in competitive activity, successful 3G auctions and final policy on 2G spectrum allocations would increase visibility on these key regulatory issues. One can only wait and watch.

kapil dev
1 decade ago
when no mnp empiment
1 decade ago
Nice One
Avinash Murkute
1 decade ago
Waiting for the day, when MSP will say we well absorb portability fee / conversion fee and will also provide free talktime as welcome gift to subscribers of competition. Let us see what happens next and keeping fingers crossed.
Free Helpline
Legal Credit