Sathya Karthik

By Sathya Karthik R, CEO of ABIBA Systems

Mobile Number Portability was expected to be a game changer in India but it did not take off as expected. The success of MNP is still a matter of debate in India. But one important outcome of MNP, the ‘Accelerator Effect’, is presented in this article. Nigeria, soon stepping into the MNP era, may have few lessons to learn.

The Indian Telecommunications industry is the fastest growing market in the world and is second largest in terms of subscriber base. The telecommunication sector continued to register significant success during the years and has emerged as one of the key sectors responsible for India’s resurgent economic growth.

Nigeria shares a similar story like India. The Indian telecom industry picked up growth after the sector was liberalized. The same is the case with Nigeria. Since liberalization of the market in 2003, the Nigerian telecom industry has experienced high growth rates, fueled by new entrants and the launch of mobile value-added and broadband services.

Like India, Nigeria is one of the biggest and fastest growing telecom markets in Africa, attracting huge amounts of foreign investment, and is yet standing at relatively low levels of market penetration.

Nigeria’s telecommunications market is set to expand by 5.9 per cent in dollar terms between 2011 and 2016 according to a detailed industry study carried out by Pyramid Research, London, United Kingdom. The sector is reported to have contributed 8.2% to Nigeria’s GDP – the third-biggest contributor, behind agriculture and trade.

Both Indian and Nigerian operators are faced with these common challenges:

  • High acquisition cost
  • Low entry barrier for the subscriber
  • Tough competition leading to price wars
  • High churn rates
  • Decreasing ARPU
  • Multi SIM usage

 

Mobile Number portability

A new era is expected to dawn on the Nigerian Telecom industry in the second half of 2012 with the launch of Mobile Number Portability (MNP). The subscriber, through MNP, can change his/her service provider while still retaining his/her mobile telephone number. This gives subscribers flexibility in the quality, price and variety of telecommunications services they choose to purchase. MNP thus promotes competition between telecommunications service providers and this will foster lower telephone prices and improved quality of service.

Looking back, mobile subscribers in Singapore were one of the first in the world to enjoy mobile number portability through this Call-Forwarding solution when it was launched in 1997. Following Singapore, countries like Hong Kong, UK and Holland made this facility available to subscribers in 1999 and now over 54 countries around the world have implemented mobile number portability. The global experience shows that the postpaid segment (i.e. high ARPU customers) is more receptive of porting-in to a better service provider compared to other segments.

MNP in India

MNP was introduced in India in January 2011. Service providers spent lot of money and effort on MNP campaigns. It was featured in silver screen glitterati and discussed at length on various business and news TV channels. However, industry bodies and service providers felt that MNP would not be a game changer in India owing to factors like multiple SIM usage and competitive tariff ecosystem. Also the postpaid to prepaid gap would affect the outcome.

Market surveys showed that a number of mobile users in India were unhappy with their existing operator and were willing to switch to another service provider if allowed to retain their number. But in sheer numerical terms, the response to MNP turned out to be less significant than what was expected. Hence MNP lost the buzz surrounding it, post launch.

At the time of launch of MNP, the mobile subscriber base in India was more than 850 million. Every month, about 12 million new subscribers were getting added across networks. In comparison to this, MNP additions paled in terms of contribution to regular net additions.

However, the experience had not been uniform across operators. Against the common belief that new entrants would gain the most, real gainers were established players such as Airtel, Idea and Vodafone. But, why? In the sections below, we analyze how this happened.

MNP Porting Statistics (January – March 2011)

Operators 

Total Sub Base
in Millions 

Sub Base
Ported In 

Ported In % 

Sub Base
Ported Out 

Ported Out % 

Net Addition 

Net Addition % 

Vodafone 

127.36

488,250

0.38

295,489

0.23

192,761

0.15

Idea 

84.29

391,191

0.46

240,402

0.29

150,789

0.18

Airtel 

155.80

530,615

0.34

382,400

0.25

148,215

0.10

BSNL 

88.82

107,724

0.12

257,817

0.29

-150,093

-0.17

Despite the delayed launch and a strained consumer adoption environment due to technical, regulatory and procedural glitches, almost 5 million subscribers had applied to port their mobile numbers by the end of March.

Though the Indian market had been on a roll with net additions crossing 10 million a month consistently since the past 2 years, majority of the additions had been in the lower ARPU segment ($ 0.60 per month). Hence the revenue growth from fresh subscribers has been less noteworthy. But, MNP port-ins were likely to be in the higher ARPU segment (above $11).

 

Contribution of MNP to overall subscriber base

Operator 

Net adds 

MNP Net adds 

Sub-base Apr 

MNP adds %age operator adds 

MNP adds %age sub-base 

Airtel 

8,818,089

507,000

164,614,687

5.7%

0.3%

Vodafone 

9,614,771

514,000

136,979,113

5.3%

0.4%

Idea 

7,820,516

470,392

92,110,157

6.0%

0.5%

BSNL 

4,300,725

(409,000)

87,891,740

-9.5%

-0.5%

 

 

 

 


 

 

 

 

MNP vs Normal additions 


Profile 

Normal fresh addition 

MNP Port-in 

Implication 

ARPU

Very low, <  INR 100

Very good, INR 500 - 1000

5 - 10x increase on revenues

Loyalty

Very low – shift within 3 months, have multiple SIMs

Very high – could remain for > 12 months

Lower churn, higher profitability

Cost Of Sales

High, since distribution model is causing increase in commissions – average INR 200 per subscriber

Low, since majority are voluntary port-ins with NIL or low acquisition costs

Improves profitability

A comparison of the profile of the fresh activations vs. MNP port - ins brings out several key differentiators.

The postpaid segment was still small - 4% against the 96% prepaid segment where the churn was greater, as non-number sticky customers always had an option to keep shifting SIMs based on promo-tariffs. Statistics show that the ARPU of regular postpaid subscriber was about 5 times ARPU of prepaid subscriber. And the postpaid subscriber was 3 - 4 times loyal compared to prepaid subscriber. Therefore the postpaid segment and customer value were the main focus areas, as it gives an opportunity to attract the “high ARPU sticky (loyal)” customers.

We analyzed the performance of the major national operators in terms of MNP statistics. Considering major players like Airtel, Vodafone and Idea we saw that the revenue from MNP additions contributed to an average 27% to the revenue from overall subscriber base additions.

What can Nigeria learn from the Indian MNP Story?

MNP additions have a much larger impact in equivalent subscriber terms than is projected by just numbers. This impact of MNP should be seen from these perspectives –

  • Brings higher ARPU subscribers to the operators
  • Attracts subscribers with higher loyalty potential
  • Lowers cost of sale

Keeping these under consideration, we have devised a metric to assess the impact of the MNP port-in (port-out) subscriber vis-à-vis the average fresh subscriber – ‘MNP Accelerator Effect’. It demonstrates the enhanced effect that MNP has owing to its characteristics - higher ARPU, higher life and lower cost of acquisition – on the operator’s revenue. MNP Accelerator Effect thus establishes the superior impact MNP additions have over normal fresh additions.

Based on industry averages, the MNP accelerator for the major Indian operators has been computed as below. Our assumption is that MNP port-ins would stay with their new operator for a minimum period of 12 months owing to higher loyalty, whereas the rest of the new additions (ie, fresh additions) will have a 3 month life. The latter will churn after a period of three months. The table below illustrates the Revenue effect of MNP port-in subscriber vs. average fresh additions over a 12 month period.

MNP Accelerator Effect in Indian Telecom Market

Thus, we can see that Idea got 70% more revenue over a year from their monthly MNP port-ins than from the normal fresh addition, though the MNP port-ins is just 6% of their average monthly additions.

So, what is in it for Nigeria?

With MNP, the wheel has ultimately taken the complete turn now and the customer is the King yet again. Nigerian operators should have a focus on MNP considering its impact on the revenues. Going the by the Indian experience, MNP additions are loyal and high value subscribers. It is this high value segment that constitutes around 20% of subscriber base that contributes around 75- 80% of the revenues. Therefore it becomes important to profile this segment to study their bhavioral patterns for two vital reasons :

  • Not losing out your most profitable customers due to MNP
  • Acquiring your competitors’ most profitable customers

This is where Analytics can help Nigerian Telecom operators in the MNP race. Operators can target subscribers from competitors’ network who are more profitable and likely to respond to their campaigns. Also operators can prevent their own subscribers churning from MNP by predicting their propensity to churn in the near future and take quick actions based on the churn scores.

Conclusion

No customer will continue spending on a service he/she does not see continuous value in. Providing rich customer experience is the key. Investments in technology and networks would give an edge. In addition, improving the service delivery processes would ensure the new customer is content. Remember, customer delight is the ultimate objective.

Business intelligence and analytics helps to define and compute newer metrics such as the MNP accelerator effect. This helps to go beyond data and numbers to unveil the ultimate business and customer value. Analytics driven, actionable insights can be used to build long term relationship with the customer.

About the Author

Sathya Karthik is the managing director and CEO of ABIBA Systems. As a management professional, he has handled a variety of leadership roles in telecom, services and technology companies. He has over 15 years of operational and leadership experience, with 12 years in the telecom and technology sectors. In ABIBA, he is translating the belief that Technology is an enabler by developing industry leading solutions to meet the BI and analytics needs of operators. Sathya’s responsibilities with ABIBA Systems include Corporate Strategy, Sales & Marketing, Alliances, Telecom domain consulting, Client Engagement and Finance.

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