In the meantime, the country's cellcos continue to disagree on the desirability and likely impact of number porting in the country. Joji Thomas Philip of the Economic Times reports that, "in a move which could make it significantly costlier for mobile users to change their operator while retaining the number", GSM operators are demanding that only those who wish to change their numbers be made to bear the cost of the enabling technology.
Philip writes that state-owned telco BSNL estimates its implemtation costs for MNP will be around USD 250 million and that only 2% of "elite customers" are likely to use the facility. Philip contunues that "going by BSNL's formula, back of the envelope calculations show that it will cost about [USD 125] per user to port... number[s]".
BSNL, then, is proposing that these costs should not be borne by the subscriber base as a whole:
"Only those customers for the benefit of whom the MNP is being implemented should be made to bear the cost of the same and not the ordinary customers, who are not going to get any benefit from the implementation of MNP. All these customers, who will utilise the MNP, are big entrepreneurs, professionals [and] businessmen who will save huge switching costs, otherwise, they will have to invest on informing friends and business partners about new number, missing calls from uninformed people and updating company web pages, brochures and business cards etc. These customers can afford and must pay for availing this facility," BSNL said in a statement to the TRAI.
This concern for the vast majority of less affluent subscribers seems admirable enough. BSNL and fellow state-owned telecoms operator MTNL, though, would appear to have a compelling need to avoid taking on a lot of extra cost, if we are to believe some analysts. As reported today by Rashmi Pratap (another Economic Times writer), industry watchers such as HSBC Securities analyst Rajiv Sharma are warning the public sector telcos not to make significant further investments in 3G mobile technology.
Sharma feels that MTNL is better placed to leverage its fixed line infrastructure for wireline broadband products, and is sceptical about the chances of the operator's plans for partnering with an overseas telecoms player to run its 3G operations, asserting that "the chances of MTNL benefiting from such a structure will be restricted as the state-owned enterprise culture of the company will get in the way of foreign telcos, restricting their ability to deliver."
Rakshmi Pratap also quotes Alok Shende of Ascentius Consulting, who believes that the below-industry ARPU recorded by MTNL and BSNL reflects that the companies have attracted price-sensitive, low-MOU subscribers who do not use VAS and would not gain from the enhanced capabilities of a 3G offering. Sharma writes that in the six months since its 3G launch, BSNL has roped in just 10,733 subscribers and that the figure for MTNL stands at "a dismal 902", an average of just 150 per month across Mumbai and Delhi, considered the two most lucrative 3G markets in India.
If these observations about the state-owned telcos' subscribers are accurate, I can perhaps see why BSNL has said that only a very small percentage of its customers are likely to gain from MNP. If the bulk of the telco's subscriber base really is so price sensitive, I'd guess that use of multiple prepaid SIM cards is widespread, with customers switching between service providers to take advantage of the optimum tariff for any given call.
How widespread? Gartner analyst Madhusudan Gupta, quoted in a Forbes India article by Rohin Dharmakumar back in June, estimates that 10% of all mobile connections in India might be instances of one phone/person with multiple SIM cards. Dharmakumar writes that India's mobile subscription numbers may also be somewhat inflated by churn, stating that 35-50% percent of prepaid connections (which, he says, form 93% of all mobile connections in India) become idle. Separating live (but infrequently used) subscriptions from totally inactive ones seems to be made harder by the existence of numerous approaches to gauging the validity of a given sub. Due to the rapid evolution of lifetime offers, writes Dharmakumar, each operator is saddled with lifetime subscribers bound by different contracts - some are required to recharge once in six months to stay active while others get by simply by getting an incoming call every few months.
In this context of low ARPU subscriptions and high churn, one can perhaps sympathise with BSNL's point of view regarding the costs of implementing MNP services only likely to benefit an affluent minority of their customers.
Joji Thomas Philip notes that two other GSM players are supportive of BSNL's argument. Bharti Airtel, for example, is of the view that "all operators who make the investment (for MNP) are entitled to recover their costs". The market-leading cellco has told the TRAI that "the investments being made by operators for the implementation of MNP needs to recovered only from the consumers who want to port their numbers" and that "ordinary customers should not be penalised by increased tariffs and call charges." Idea Cellular has chipped into the debated by observing that service providers should be compensated for the one time CAPEX and recurring OPEX involved in MNP.
Strongly opposed to this line of argument, writes Philip, is CDMA operator Reliance Communications, which also launched GSM services earlier this year. The cellco asserts that since it costs less than Rs 50 (around one US dollar) for a prepaid subscriber to take a new connection, the porting cost should be lower than this figure and has suggested that the any fee charged to the individual consumer be fixed at Rs 20. If we are to believe the output of MTNL's number-crunching, Reliance Communications seems to be a strong advocate of spreading the much, much higher costs of MNP across a subscriber base most of which is not likely to be interested. Is Reliance motivated to take this position by its status as a new entrant in the GSM space? To do so, I would have thought, is to buy the idea that MNP helps new entrants and hurts incumbents. The last time DevelopingTelecomsWatch visited the MNP issue, we considered an alternative view - as articulated by Raymond Yu of telecoms think tank Ovum - that all MNOs are vulnerable to MNP-driven churn. Yu cites the cases of Greece and Lithuania, where the largest operators actually managed to increase their market shares immediately following the introduction of MNP.
Aside from this disagreement about how best to spread the cost of implementing MNP, what else might India's operators need to consider? ARPU may be one worry, reported Rajesh Kurup of the Business Standard in June, basing his article on a study by stokebrokers Angel Broking. This study indicates that ARPU would be negatively impacted by around 5% and that telcos' margins would also drop by 100-150 basis points and earnings per share estimates would be pruned by 9-21%. Angel Broking belives that an increase in subscriber acquisition and retention costs plus higher capital expenditure to improve service quality are also expected to exert pressure on margins and earnings growth.
What proportion of post-paid subscribers might be motivated to churn once they have the option of retaining their existing numbers? An EFYTimes article last month, drawing on a recently conducted Mobile Consumer Insights study by the Nielsen market research company, reports that around 18% of contract customers will change service provider once MNP is live. The figure is higher for customers of Tata Teleservices and Reliance Communications.
According to the study, around 55% of respondents were generally satisfied with their operator, but only 48% are satisfied with network quality. The operators are probably concerned by the fact that scores for network quality satisfaction were down compared to previous iterations of the Nielsen study. Bharti Airtel, BSNL and Reliance Communications have registered the biggest drops in this metric. According to the study, 43% of the people polled are satisfied with the price they pay for their service.
My feeling is that ARPU in India is already so low that differentiation by quality of service could prove to be a more powerful tool for any operators which cope best with this issue in India's highly competitive market. I don't imagine that competing more aggressively on price than is currently the case could be sustainable for very long.
India's operators may be interested to note that loyalty to operators is, according to the study, higher among lowest socio-economic groups, older age groups and among female customers.
Lots to think about, then, for India's numerous competing mobile operators. Let's see, however, if this end-of-year deadline for MNP going live is really going to be met. Past delays have been numerous and India would not be the only country in the world to see shifting deadlines as the many concerns about MNP are debated. Right now in Thailand, for example, while MNP regulations have come into force, it is not yet clear when mobile subscribers will be able to port their numbers as operators are not yet ready for the service, TelecomPaper reports.
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