Mobile Number Portability in India and its effects on Telecom   brands

India is set to become the world’s largest mobile youth market passing China in 2011 with 281 million activations.  By 2012 mobile owning youth in India will outnumber the entire population of the United States.

Up until this year, mobile operators in India have enjoyed very minimal external threats, but in just a few months Mobile Number Portability (MNP) will be introduced into the market. MNP enables mobile subscribers to change their service providers or their location without having to change their existing phone numbers. If the subscribers are not satisfied with the services of their service provider, they can change their service provider while retaining the existing phone number. This infuses competition among service providers and forces them to improve their service standards to check subscriber churn.

MNP presents a number of new challenges and opportunities for marketers and brand managers to maintain and garner greater share of the youth market. One of the biggest challenges for the them will be to retain the existing customers. According to research from The Nielsen Company, close to one in five (18%) of Indian mobile customers said that they would change their operator if they have the ability to retain their number.  For some mobile services, this news might cause some concern: a quarter of customers of Reliance and Tata Indicom said that they would be keen to change if MNP becomes reality, while 19 percent of BSNL subscribers would do the same.. The Telecom Regulatory Authority of India (TRAI) itself has estimated the porting rate to be at 10% in the first 15 months and 7%, 6% and 5% for the successive three years.

Nielsen Survey

So what does this mean for the Telecom marketers in India? Until now, marketers adjusted their pricing strategies to cut out the competition. However, in the wake of MNP, pricing won’t be the deciding factor. Currently, there are brands who provide 1 paise a second plan, that’s barely a quarter of a cent. Secondly, Mobile companies will be forced to look at technology to retain a greater share of the market. However, the reality in India is that not many people have woken up to the smart phones consumption yet. So that will be another challenge.

I won’t be surprised if brands start following the UK model of phone contract systems, wherein a consumer is tied to a service provider for a certain period of time which reduces the risk of consumers switching between various brands. With the intensely competitive mobile phone market, service providers will have to constantly come up with more exciting offers and greater value-added features.

Social media will play a key role in helping marketers and brand managers to retain a greater share of youth market. Needless to say, brands who adapt this new promotion strategy will have a clear competitive edge. There is a greater need to provide a package to the consumers whereby they could form a network of friends and families and enjoy free SMS, free internet access and the lowest call rates within their network of people.

How Mobile Number Portability Works in IndiaINTRODUCTION

The much awaited MNP (Mobile Number Portability) finally launched on 20th Jan 2011 in India, empowering mobile phone consumers to change service provider conveniently. Mobile Number Portability (MNP) allows the mobile subscribers to retain the existing mobile phone number when the subscriber switches from one access service provider (Operator) to another irrespective of mobile technology or from one technology to another of the same or any other access service provider, in a licensed service area.

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PROJECT BACKGROUND

The projected was started long back in India. The first mile stone came when The Telecom Regulatory Authority of India (TRAI) issued draft Regulations to facilitate Mobile Number Portability (MNP) implementation in India and submitted recommendations to DoT on 8th March 2006. The draft regulations lay down the business process for implementing mobile number portability.The Department of Telecom (DoT) had accepted TRAI’s recommendations on 10th December 2007. DoT had also accepted the suggestion of TRAI that a Steering Committee be formed under the aegis of TRAI, to deliberate upon various issues involved in the implementation of MNP in the country. Accordingly, the TRAI constituted a Steering Committee consisting of representatives from TEC, Service Providers and their Associations. Based on the report of the

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Steering Committee and deccision of the Authority, a draft “Request for Proposal” (RFP) was prepared and submitted to DoT for initiating the process for MNPO (Mobile Number Portability Operator). Subsequently, the DoT issued guidelines for MNP service license on 1st August 2008. The DoT guidelines envisaged geographical division of the country into the two Number Portability Zones (Zone 1 – North West & Zone 2 – South East), each consisting of 11 licensed service area.DoT issued the tender Document on 25th November 2008 for MNPO. Based on the selection parameters set in the guidelines for MNP service license, one MNP service licensee in each zone was selected. M/s Syniverse Technologies(I) Pvt. Ltd was granted license for operating in Zone-1 (North-West India) and M/s MNP Interconnection Telecom Solutions (I) Pvt. Ltd (Telcordia) was granted license for MNP Service Zone-2 (North-East India).Further, on 6th May 2009, DoT issued detailed instructions to all Access Provider/NLD/ILD licensees regarding provisioning of MNP.On 25th Nov 2010, MNP has been implemented in Haryana as a pilot LSA to observe implication of MNP on voice as well as non voice calls. Finally, 20th January 2011, MNP has been implemented across the India.

MNP PRINCIPLE IN INDIA

Applicable only for Mobile Numbers

Number Portability is only applicable to Mobile Numbers not for the Fixed/Land Line Numbers

Applicable only in intra licensed area

A mobile subscriber can switch from one service provide to another within the same license area. Portability is applicable only in intra-circle; it is not applicable in inter-circle.

Applicable irrespective of Technology

Portability is Possible irrespective of Mobile Technology used by Service Provider. A mobile subscriber can change its operator from CDMA to GSM/UMTS and vice-versa.

LRN based routing

DoT has allocated 4 digits unique routing number called LRN (Location Routing Number) to all Mobile Operators for each circle to identify individual network. Post MNP calls (Voice/Non Voice) will be routed on the basis of LRN. Ported numbers are prefixed with a LRN identifying the new service provider for the number. So when MNP database receives a query for a given MSISDN, the data base will return the MSISDN prefixed with the LRN of the MNO to which it (MSISDN) belongs. MNP database always responds to a query with “LRN+B Number”. In case of Ported Number LRN belongs to new service provider and in case of Non – Ported Number LRN belongs to same service provider.

MNPDB query & Routing Method

All call query and direct routing method has been chosen for the MNP in India. MNPDB contains all ported in and ported out numbers. Originating network performs MNPDB query for all originating calls and directly routes to Subscription network.

India Terminating International Calls/SMS

ILDOs/IGPs are responsible for MNP dip for the International calls and SMS terminating to Indian subscribers. ILDOs/IGPs supposed to be an originating network for the Indian terminating international calls/SMS. ILDOs/IGPs perform MNP dip and route calls/SMS directly to the subscription network.

MNP Zones and LSA (Circle)

Below tables represents LSAs and zones for MNP service.

MNP ZONESS. No. ZONE 1 – Licensed Service Area ZONE 2 – Licensed Service Area1 Gujarat Andhra Pradesh2 Haryana Assam3 Himachal Pradesh Bihar4 Jammu & Kashmir Karnataka5 Maharashtra Kerala6 Punjab Madhya Pradesh7 Rajasthan North East8 Uttar Pradesh (E) Orissa9 Uttar Pradesh (W) Tamil Nadu including Chennai10 Delhi West Bengal11 Mumbai Kolkata

HIGH LEVEL NETWORK ARCHITECTURE FOR MNP SOLUTION

Fig 1 shows high level network architecture and network components for MNP solution. On high level, complete network can be visualized into two parts:

Central Side- MNPO ( Mobile Number Portability Operator)

The central side is a MNPO, supposed to provide MNP Service in a particular zone. It is also called MNP Clearing House (MCH). MCH shall receive mobile number portability requests from the recipient operator; forward it to the donor operator for verification. On getting clearance from donor operator MNP service provider shall control and coordinate the mobile number portability process. At a predetermined date and time the MNP service provider will instruct the donor operator to disconnect the mobile number of the subscriber and upon receiving confirmation of such effect shall instruct the recipient operator to activate the mobile number of the subscriber. Once the mobile number is activated at the recipient operator’s end, the MCH will send the details of the porting to the centralised Number Portability Database (NPDB) which

in turn will update its own database by an appropriate routing number called Location Routing Number (LRN), a unique routing number assigned to each operator in a service area by the DoT. This updation will be communicated by the NPDB to all the service providers for updating their respective local Number Portability database.MNP Service provider has to deploy its system (network) in redundant way as shown in figure in two different geographical areas, one as a production site and another as a disaster recovery site to avoid interruption in service due to failure of one site. Both side must be in sync and work in active redundant mode.

Mobile Number Portability and

its impact on the Indian telecom sector

Introduction:

After a delay of nearly two years, the much anticipated Mobile

Number Portability (MNP) was launched in India on November

2010

implementation of MNP within the rest of the country will be

completed by December 2010 or January 2011 in a phased

manner as per an announcement by the Department of

Telecommunications (DoT). MNP allows subscribers to retain

their mobile phone numbers when changing from one service

provider to another.

Implementation Guidelines:

DoT has divided the country into two zones for the purpose of

MNP implementation. It has awarded licence to one MNP

Operator in each zone. For porting, subscribers need to send an

SMS to receive a Unique Porting Code (UPC) from their

current service provider. They will then need to apply to the

new service provider using the UPC received as reference. The

new service provider will take the requisite actions to enable

the subscribers to get connected to their network. As per TRAI,

a period of maximum of 7 working days has been prescribed

for completion of the porting process, except for J&K, Assam

and Northeast where it would be a maximum of 15 working

days.

beginning

with

Rohtak

in

TRAI has limited the porting charges that can be charged by the new service provider

to each subscriber at Rs.19, however this charge can also be reduced or waived off by

the new service provider. Once subscribers have switched to a new service provider,

they need to wait for 90 days before changing their service provider again.

Global experience of MNP implementation:

Around 60 countries across the globe have already implemented MNP using different

models and strategies. MNP was first implemented in Singapore in 1997 followed by

Hong Kong in 1999 and Australia in 2001. The global experience of MNP has been

mixed with countries like South Korea, Hong Kong and Australia experiencing higher

churn rates while in other markets like UK, France, Japan, Taiwan and Singapore

MNP did not result in significant increase in churn. The impact of MNP depends on a

number of factors, such as the time and ease of completion of the porting process,

porting charges, penetration levels, pre paid and post paid subscriber mix and the

marketing initiatives undertaken by the service providers. An example of the failure

of MNP due to the cumbersome porting process can be derived from Pakistan where

MNP was launched in March 2007 but experienced less than 1% portability due to

poor customer service and time consuming process of porting.

The quicker and more seamless the porting process is, the higher is the likelihood of

churn, however if the porting process is cumbersome subscribers may not want to opt

for it. One of the reasons for the success of MNP in countries like Australia is that the

entire porting process there is completed within 3 hours.

Likely Impact of MNP on the Indian telecom market

MNP will provide mobile subscribers with a choice to change their service provider

easily in case of dissatisfaction without the hurdle of changing their mobile number in

the process and will result in an overall improvement in the Quality of Service (QoS)

parameters such as average call completion rate and number of call drops as the

operators strive to retain their market share. Thus, MNP is likely to create a win-win

situation for the subscribers and will make the market more quality oriented. However

its potential impact on the Indian market depends primarily on the ease of portability

and the initiatives taken by the service providers to promote the service and increase

MNP awareness amongst the subscribers. The Telecom Regulatory Authority of India

(TRAI) has set a fee ceiling of Rs.19 for MNP, and hence cost should not be a

hindrance to MNP implementation.

Although the prescribed time limit for porting is a maximum of 7 working days, its

efficacy needs to be tested in reality. Thus, porting time may emerge as a bone of

contention and limit the widespread availing of the service. The Indian telecom sector

is predominantly prepaid where the churn rates are already high. However, with the

introduction of MNP, the prepaid churn may further increase, depending upon the

ease of portability. However, the major impact of MNP is expected to be felt on the

postpaid churn rate. Although post paid users account for only around 5% of the

subscriber base, a small increase in the post paid churn may significantly impact the

already dwindling revenues of the telecom operators since the postpaid ARPU is

The impact of MNP may also be felt on subscriber growth rate as one of the factors

contributing to this growth was the increasing trend of subscribers opting for multiple

SIMs. With MNP available at low cost, the subscribers may prefer to switch operators

rather than keeping multiple SIMs. This may also have a positive impact on the

The Indian telecom market is already very competitive with all the service providers

matching each other in the provision of varied services and in tariffs and hence the

customers have very little to choose between the different service providers. Thus, the

only differentiating factor is likely to be the QoS which may result in increased churn

during the initial phase of MNP implementation. However, in the long run all

operators will work on offering better QoS to retain their customer base and the

impact of MNP on the churn may reduce. Although CARE believes that MNP will

positively impact the QoS offered by the various operators, the long term impact of

MNP on the dynamic Indian telecom market may vary based on a number of factors

that will emerge as the service gets launched across the country.

Bharti Airtel stock outperforms peersMumbai: Bharti Airtel, the country’s largest telecom player, has emerged as an outperformer in the sector. The company’s shares have started a steady rally at a time when other telecom stocks are still struggling.

Over the last year, Bharti gave a robust return of close to 25 per cent while Reliance Communicatons (RCom) lost 38 per cent of its share value. Shares of Aditya Birla group's Idea Cellular could manage a nominal return of 4.5 per cent. In the current financial year so far, Bharti shares have gained over 5 per cent while Idea Cellular has remained flat and RCom has lost 1.3 per cent.

"Bharti is now the favourite stock in the telecom sector. Since the industry's downturn began in mid-2009, the company has overcome the damage by a large extent. In terms of the valuation, fundamentals and cash generating capacity, Bharti is better placed than its peers. Moreover, the company's average revenue per user (ARPU) is much better in the industry," says the research head at a domestic brokerage house.

According to Devang Mehta, vice-president (head-equity sales) at Anandrathi, "Telecom was a much beaten down sector. Bharti has emerged as the top performer. The company's African operations are also expected to see a turnaround soon." The company has consistently been the top pick of several brokerages in the telecom space for the last few quarters.

"We are maintaining a bullish view on Bharti from a 1-2 years' perspective," says an industry analyst at another Mumbai-based brokerage. "At at time when other players are still facing cash burns due to the 3G auction last year, Bharti is comfortably placed with adequate liquidity. Moreover, the company has held on to its revenue market share while others have failed," he adds.

In a note, Sharekhan says, "The strong performance was on account of a series of developments, including an improving domestic environment and the likely clearance of the long-pending regulatory overhang on the sector."

Moreover, analysts say there is not much impact on Bharti's subscriber base due to Mobile Number Portability (MNP). "In fact, it has been a net gainer as against earlier expectations that the impact on Bharti would be strongly negative," adds the note.

According to the latest statistics available from the Telecom Regulatory Authority of India (Trai), of 791 million mobile subscribers, Bharti had a subscriber base of 159 million or 20.1 per cent of the market share -- the largest in the industry.

Brokerages have come up with their revised targets for the company. Motilal Oswal Securties had taken a buy call, with a target of Rs 410, while Sharekhan revised its target to Rs 398 a share.