Several countries are set to launch mobile number portability, with Singapore scheduled on last week, Malaysia in August and India soon after.
As we were looking at countries preparing for MNP, we were wondering whether we can predict what will happen to those markets once MNP is "live". A recent forum in Singapore made us wonder how rational a MNP market can be.
As we usher in the age of digital convergence, the need to "stay connected, anywhere, everywhere" has led to the transformation of the mobile phone from a simple communication device to a personal digital side-kick that people cannot leave home without. Such is the intimacy that a person has with his mobile phone that the phone number has become the person's identifier: lose the number and you lose your identity. It is this same reason why MNP has the power to cause ripples within a country's telecom industry.
MNP is traditionally used by regulators to stimulate competition as it provides the ability for a person to retain his mobile number when he switches from one telecom operator to another.
Looking at historical data from Accenture and Ovum, we came up with the following observations. First, porting statistics are difficult to predict. The most direct impact of MNP is increase in churn levels as subscribers who previously refrained from churning for fear of losing their number are now all at risk of switching to another operator.
However, it is impossible to determine the level of porting that MNP will generate. In Finland the initial estimate for monthly porting volume was 10,000 ports per month. In the first month, there were 60,000 ports and the highest porting volume attained was over 200,000. In Australia, the regulator had planned for one million ports within two months but this was achieved in 20 months.
Second, there is no clear winner despite traditional thinking that incumbents will lose most and that smaller players tend to benefit most from MNP. This is true in the case of Japan where MNP served to open up a window of opportunity for market leader NTT DoCoMo's competitors KDDI and Softbank. KDDI benefited the most from MNP by focusing on its popular mobile data services and heavily subsidized attractive handsets.
The battle begins
In Hong Kong, however, the smaller players paid a heavy price for MNP as the regulator voided all existing post-paid contracts, resulting in a major price war.
Third, ARPU decline is not a fatality since in many countries facing MNP, ARPUs are declining. A more thorough analysis, however, reveals that ARPUs are already declining prior to MNP. This was the case in Australia in 2001 as it is the case in Singapore today. More importantly, we observed that Optus' monthly ARPU grew 13% the year after MNP - up from A$55.90 (around $53.72 today) in 2001 to A$63 ($60.54) in 2002.
People's behaviors in an MNP context are not rational. We observed divergent behaviors as far as MNP is concerned. One is that people who have been locked in with an operator for a long time have developed a perception of their operators (good or bad) and MNP will reinforce this perception either by pushing them to another operator or to affirming their loyalty toward an operator.
Then there is the tendency of certain customers to focus on the short-term value that they can get by switching or being loyal instead of looking at the future greater value that they can generate with the other option - staying if they switched, or switching if they stayed. This is called picoeconomics behaviors.
As there is no particular rule to determine which customers will have confirmation bias or picoeconomics behaviors, operators cannot bet on modeling and customer insight to determine their MNP strategy. This is why we advocate that operators focus on the value they can generate for their customers.
A good example of such an approach is Verizon's FIOS offering in the US, which has been highly successful by focusing on value rather than price. Verizon has managed to compete effectively against competitors such as Comcast in the cable segment despite a significantly higher premium and through their bundled offerings. Verizon has also been successful in building stickiness to its offerings despite MNP.
As Singapore, Malaysia and India enter the age of true MNP, early observations suggest some operators are considering a price war. This will have impact on churn, and is also likely to lead to lower EBITDA. The distinction we anticipate is that this probably comes, because of behavior described herein, with an uncertain upside in terms of market share and subscriber base.
To their credit some operators appear to be refocused on offerings that are less reliant on across-the-board discounting and put more emphasis on the value of the package they market. Over the long term, whether rational or not in the short term, customers will know the difference.
Guillaume Sachet is Accenture's communications, media and high-tech ASEAN strategy lead; Tan Li Yu is a strategy business analyst at Accenture