The much-touted mobile number portability (MNP), expected to become operational as early as September this year, will in all probability become a boon for customers and bane for telecom operators.
The implementation would become negative for the Indian telecom sector as it is expected to hit the companies’ margins very hard due to high churn rates, possible failure in quality of services and an expected sharp fall in average revenue per user (ARPU), according to a study done by Angel Broking.
It is believed that MNP would be an additional ‘pressure point’ for telecom operators and even as it is overall a zero-sum game, it will be margin-dilutive. Based on the initial estimation, a likely 5% further decline in ARPUs, a 100-150 basis points negative impact on margins and consequent fall in EPS (earnings per share) of 9-21%, the study added.
The Department of Telecom (DoT) in March this year, issued licences to two players - Syniverse Technologies (India) Private Limited and MNP Telecom Interconnection Solutions India Private Limited (MITS), a Telcordia joint venture with an Indian company, to take up the MNP activities across the country in a phased manner and the same is supposed to be completed by mid-2010.
Given the spectrum crunch in the key metro service areas, the churn rates, which are already in the range of 4-5% a month (pre-paid subscribers), are likely to increase further. Following the higher ARPUs and revenues from the metro areas, the higher churn rates would hit the operators revenue and profitability hard, the study said.
MNP introduction is also likely to result in higher subscriber acquisition and retention costs for operators. The likelihood of high-end post-paid subscribers and heavy users porting to other operators’ networks is certainly not a desirable outcome for telecom operators. Post-paid subscribers are typically high usage customers that generate higher ARPUs. Even though these users account for a fairly low proportion of overall subscribers, they contribute more significantly to the revenues of these companies. Assuming a 5% share of post-paid subscribers, calculations show that the revenue share of these subscribers is considerably higher than other share.
Consequently, to ensure that such users stay connected to their networks, mobile operators may be forced to slash rates, offer more freebies and resort to large-scale bundled offerings and value-added services. Greater expenditure on SG&A and higher capex investments to improve quality of service are also expected. Thus, even as MNP implementation...
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