Mobile Number Portability: The Hype and the Impact

Mobile Number Portability (MNP) equips customers to switch over to an alternative network service provider without having to change their numbers. MNP was tipped to be the game changer and turn around the competitive landscape of the Indian Telecom Sector. It was launched with much enthusiasm in January, 2011 by TRAI (Telecom Regulatory Authority of India), after a successful model test in Haryana . However the actual customer switch-over rate has remained far below 1% per month compared to  a monthly average of 3-5% in more developed nations notching up only around 109 million MNP applications in the past 3 years. This is a little over 10% of total customer accounts switched in 36 months and is far below the expected pre-launch predictions.

Despite 55% customers expressing satisfaction with their current network provider and 48% over the network quality, there were strong supporting reasons for introducing MNP in the first place.  A Nielsen survey done at the stroke of the launch of MNP in India had revealed high customer interest (~1 out of every 5 customers) in using this facility (refer Chart 1). There were evident customer advantages meant to be seen with this new introduction, namely :

  • Major reduction in switching barrier, especially for customers owning a particularly ‘good’ number which they did not want to change
  • Inducing fair competition among the Network Service Providers (NSPs)
  • Better tariff and promotional plans
  • Improved quality of service

These were supposed to be the new rules of the game for Service providers if they had to retain their customers and poach new ones from other competitors.

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 Chart 1: Source – Nielsen Survey, 2010

Yet the actual impact was far less than originally predicted by TRAI. The reasons for the unexpected low impact are numerous. Researchers claim that higher %age of MNP is an indication of the level of maturity of the market and there is evidence to infer that Indian customers are not very ‘number’ conscious. Pre-paid account users, which form ~97% of all Indian wireless accounts, still exhibit a trend of buying fresh SIM cards (getting a new number) instead of necessarily using MNP. Even though post-paid account users show a better trend in this regard, the number of post-paid accounts is only 3% of the total. Also, data shows that for most of the experienced service providers, the parameters like tariff charges, network quality, value added services, etc. are more or less similar to each other, hence, there is no major value proposition for the customer to make use of MNP extensively. At times, even the network providers are not keen on poaching accounts which are historically low revenue generating.

Telecom Sector Impact Analysis:

Despite the Indian Telecom sector being a primarily pre-paid market, i.e., ~97% share in terms of user accounts, the remaining 3% of Post-paid accounts are extremely important for NSPs as they drive the overall profitability. The advent of MNP has meant that new entrants can capture adequate number of customers by poaching from the incumbent market leaders through offering higher value for price. Hence, customer service, quality of the network, value added services and customized tariff plans are the key to long-term leadership.

The Average revenue per user (ARPU) is much higher for Post-paid customers, hence, the profitability too (refer tables 1 & 2).

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Table 1: TRAI official report, 2013

Table 3

Table 2: TRAI official report, 2013

The Telecom sector in terms of its user account base is declining post the advent of MNP (chart 2), yet the overall revenues and correspondingly ARPU are on the rise (chart 3). This has been a positive for the NSPs as now the cost of issuing more accounts and blocking more numbers has gone down, adding to their profits.

The Telecom sector in terms of its user account base is declining post the advent of MNP (chart 2), yet the overall revenues and correspondingly ARPU are on the rise (chart 3). This has been a positive for the NSPs as now the cost of issuing more accounts and blocking more numbers has gone down, adding to their profits.

Chart 1

Chart 2: TRAI official report, 2013

Chart 2

Chart 3: TRAI official report, 2013

 

 IDEA: a clear winner

The impact of MNP has been best tapped by Idea Cellular and Vodafone, amongst all private and public sector players. Idea Cellular had a net 3.32 million influx of customers while Vodafone registered 2.89 million, in over a year of the introduction of MNP. Customer feedback suggested that it was the network quality and clarity of voice which led them to choose Idea over other NSPs. During the past fiscal (2012-13), Idea has registered the highest growth in revenues, on a percentage year-on-year basis (Exhibit 1). The contribution of MNP can be estimated as (assuming constant trends over last 2 years) = 3.32 * 10^6 * 105 (ARPU) *12 = 418 Crores, in terms of Gross Revenues. This amounts to nearly 229.9 crores (55%), in terms of Adjusted revenues, which is huge.

Attributing to the same benefits, consumer surveys have shown that customers have rewarded NSPs for good customer service and high network quality with competitive tariff plans. The reasons for not switching over to a competitor were dominated by customer satisfaction and brand loyalty (Table 3).

Table 3

Table 3: Paper by Rajesh Yadav and Nishant Dabhade

Similarly, as expected the main reasons for customers who made use of MNP were led by better features offered by competitors and lack of up-gradation schemes for the current service provider. (Table 4)

Table 7

Table 4: Paper by Rajesh Yadav and Nishant Dabhade

Looking ahead:

The next step in this direction from the Government is to provide National level Mobile Number Portability. This will enable customers to retain their mobile numbers as they move from one circle to another when they change states. Thus, not having to be on roaming and yet be able to retain the old numbers could be highly advantageous for such clients. This is targeted for an April, 2014 launch. But the impact seems to be primarily restricted to those people who usually get frequently relocated, which constitutes less than 1% of User accounts per month. Thus, expecting a major overhaul by this next leg of development in the Telecom space is highly unlikely. Hence, despite minor positives for both- customers and NSPs, Indian telecom sector still waits for its real game changer.

Table 4 (Source: TRAI report, 2013)

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Udit Kejriwal is a PGP-2 student at IIM Ahmedabad. An Aditya Birla Scholar and a runner-up at the ‘Dewang Mehta Best Student in Management’ competition nationally, Udit interned with McKinsey and Company for his summers. A former General Secretary Technology at IIT Kharagpur, Udit worked for 2 years as Quality Assurance Manager with Procter & Gamble on completion of his Bachelors in Mechanical Engineering. He is a passionate dancer, a long distance runner and a die-hard sports enthusiast.

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Hello? Rural India calling!

The advent of mobile phones in the past decade has led to an undeniable transformation of the landscape of the world. It has touched the lives of everyone – from the banker to the boatman. As the cellular phone continues its surging progress towards ubiquity, we shall examine how it is affecting the lives of the Indian farmer, and changing the face of agriculture in rural India. 

Mobile Telephony in Agriculture

In the field of Information and Communication Technology for Development, or ICT4D, mobile phones are touted as a potent tool for development. The sheer scale of global adoption of mobile phones in the last decade perhaps lends credibility to this fact. Even within India, the last decade has seen a steep rise in mobile phone subscriptions, with a wireless teledensity of 70.57%, as of January 2013. With the saturation of the urban market and the rising popularity of the Bottom of the Pyramid concept, mobile phones have penetrated deep into rural India.

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With its ability to offer wide and rapid outreach across a large geography, it is no surprise that mobile phone technology has its applications in the field of agriculture. Enabling higher speeds of information exchange, it brings farmers, organizations and markets closer to each other, with the direct fallout of greater transparency and leveraging power to the usually downtrodden farmer.

Case Studies: Mobile-based Services for Farmers

The opportunities of using mobile phones in agriculture are immense, and subsequently, there have been a plethora of mobile-based services targeting farmers. Some are listed below:

Reuters Market Light, a subsidiary of Thomson Reuters, provides personalized agricultural information over mobile phones to the farming community, to a cumulative subscriber base of over 1 million across 13 states.

Ekgaon Technologies, started by an Ashoka Fellow, offers a service called ‘OneFarm’ in Gujarat, Rajasthan and Tamil Nadu, that provides soil-specific nutrient recommendations to the farmer through an automated system in local language via mobile phones.

Recently, ITC Ltd. Launched an interactive mobile telephony system called ‘Namma Sandesh’, that provides crop advisory, market prices, weather forecast and local news to tobacco and ragi farmers in Karnataka.

The Benefits

The introduction of mobile phones has changed agriculture in multiple ways.

First, it has helped farmers make more informed choices. It has helped connect farmers separated by vast distances, enabling the sharing of knowledge on best practices. Moreover, tailor-made weather forecasts add weight to his crop decisions.

Beyond this, it has enhanced his access to markets and mandis previously out of reach. No longer can the middleman use information asymmetry against the gullible kisan (farmer) – information from markets around the world is now at his fingertips.Beyond these, mobile telephony has helped in rapid transfer of information across vast distances. This is critical because a few hours can make all the difference during a pest or disease outbreak.Finally, it has helped empower the farmer with information, opening new doors in terms of opportunities and knowledge.

The Challenges Ahead

While there has been significant contribution of mobile phones in rural India, there are many hurdles to be overcome.

The major hurdle is simply technological and financial considerations. To develop infrastructure for improving mobile networks in rural India would require the willingness of companies to invest for low initial returns. The financial burden of setting up infrastructure could be reduced by sharing of networks by carriers.

While mobile connectivity is high in rural India, mobile data (or GPRS) is yet to catch up. This restricts farmer-oriented services largely to text SMS or voice as the mode of communication.

This restriction is compounded by the low levels of literacy, and tech-literacy in far-flung areas. As voice is expensive, most services focus on text SMS-based service delivery. However, many handsets do not support Indian language text and English is little-known in villages.   

There is also the issue of the quality of content delivered through various services. From the content to the delivery, there are many challenges faced in designing effective services for the Indian farmer. Innovation and creativity are much-needed, and the content has to be packaged for the local socio-cultural setting.

As a final word, it would be wise to remember that mobile telephony, just like any technological innovation, is not a panacea. Its interactions with the social fabric are complex. For example, in a typical rural family, the head of the house owns the phone – a subtle reinforcement of existing power hierarchies.

Thus, mobile telephony has rewritten the story of the rural farmer. It has shrunk the distances separating him from the rest of the world and brought information to his fingertips. It has brought services that reduce the risk of crop damage or failure, and improved his access and aspiration levels. There is, however, a long way to go. Technological, infrastructural, content-related and social challenges need to be overcome.  

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Girish is a PGP-1 student of IIM Ahmedabad and a member of the Consult Club. Prior to joining IIMA, he graduated from the Indian Institute of Technology, Madras with a B.Tech in Mechanical Engineering. He loves music, reading and discussions, and is passionate about the social sector.