Lights, Camera...MNP

Bad service, rude customer service agents, unending pesky calls despite registering on 'Do Not Disturb' services! Subscribers in India can finally change their service provider without having to change their telephone number. Kapil Sibal, telecom minister heralded the launch of Mobile Number Portability in Haryana on November 25, 2010, while promising a pan-India launch by the end of January 2011.

So, what happens now? Will it be all smiles and ringing cash registers? Globally, MNP rollout has met with mixed results. Churn due to MNP has ranged from 22% in the US to a more humble 0.4% in Portugal. Low impact of number portability in Singapore was primarily due to limited tariff cuts by operators, while high porting charges were responsible for similar results in Japan and Taiwan. Experience indicates that the impact of number portability has turned out to be less of a challenge as compared to what operators feared it would be.

The Indian government chose to implement MNP primarily to ensure greater competition. While the market is predominantly prepaid, it is envisaged that competition will foster innovation in products and pricing strategies. Further, operators will be forced to re-look at the levels of customer service.
Already with an immense pressure on margins, the removal of a key barrier to churn is set to impact all service providers in India, but more specifically the incumbent operators. However, the impact will be different for prepaid and postpaid subscribers as 'subscriber-engagement' with a service provider is different for both.

Prepaid subscribers' points of engagement with a service provider would be cost of acquisition, price and channel presence while that of a postpaid subscriber could be brand, continuing customer service, quality of network and prices for value based services.

MNP based churn would be a direct consequence of dissatisfaction with these points of engagement. Operators would be affected by such a churn during the early phase of launch of MNP. Sustained churn on account of MNP is traditionally due to sustained dissatisfaction with the quality of service-both with the quality of network and quality of subscriber interactions.

Hence, on the face of it, MNP may not appear to be much of a threat to the prepaid subscriber base. Incumbent operators would probably not face a large increase in the cost of acquisition of prepaid subscribers. However, marketing costs of retention of subscribers could rise gradually. Impact of MNP on postpaid subscribers could be an industry-wide game changer. Subscriber points of engagement would be better analyzed, quality service level differentiation better implemented and marketed. This would certainly lead to greater pressures on margins on account of significant changes in people, process and technology levels.

So, how does an operator optimize his investments into building a better customer service and brand-engagement?

Process optimization based on lessons from FMCG, retail and banking industries would lead to reducing turnaround times and provisioning errors. Complaint handling and document management procedures can also be enhanced. However, all operators would need to devise holistic strategies to build 'best-in-class' customer services. This can be enhanced by a greater insight into subscribers and their points of engagement with the company. Outsourced operations that have customer-centric activity will be re-looked at with a renewed vigor.

Marketing analytics of cluster and segment subscribers based on the usage and demographic patterns can lead to a critical insight into behavioral patterns. Predictive analytics can ensure a better engagement with promotions and schemes. An earlier KMPG publication discusses that if subscribers are broadly divided on the basis of profile or occupation, each of them is likely to have different levels of affinity to exercise portability. The perception of true value, beyond the traditional freebies and promotional services, would make the subscriber more willing to remain loyal to their service providers.

The true, long term impact of MNP remains to be seen. However, it is quite clear that MNP will force operators to re-look at their strategies to retain a competitive edge. It is critical for the industry to refocus on subscriber needs rather than initiate a new renewed price war. Subscribers, on the other hand, can look forward to a much greater value from their operators.

Romal Shetty
executive director, advisory,
KPMG India