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MNP Effect: Spike in churn rates

February 15, 2011
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Within 15 days of mobile number portability (MNP) being launched across the country, over 1.7 million mobile subscribers reportedly opted to change their service provider.

According to the Telecom Regulatory Authority of India (TRAI), of the total number of porting requests received, 0.22 million were from the Haryana circle alone, where MNP was first implemented as a pilot project in November 2010. Among the other circles in Zone I (comprising the northern and western regions of India), Gujarat witnessed the highest number of switching requests at 0.16 million followed by Rajasthan at 0.14 million.

In MNP Zone II (comprising the southern and eastern regions), the maximum number of requests were received in the Karnataka and Tamil Nadu circles (0.11 million collectively).

TRAI has been closely monitoring the implementation of MNP, and is going through data provided by operators from across the country. Based on this data, the regulator has instructed service providers to strictly comply with the MNP regulations.

TRAI has noted that some requests for switching networks were rejected by the operators mainly because the subscribers had put in an incorrect unique porting code (a unique number provided to a subscriber who wants to change the operator) in the porting form. Many rejections also took place due to the non-payment of outstanding bills or on account of the non-completion of the 90-day clause, where a user has to remain with the operator it has ported with before changing  operators again.

The launch of MNP was expected to result in an initial spike in the churn rate. With MNP, users who were unhappy with their network coverage or customer services would be inclined to change their service provider merely by paying Rs 19, or nothing as most operators have decided to do away with porting charges.

Anticipating such a response, companies like Idea Cellular and Vodafone Essar aggressively advocated MNP to market their services even before its rollout in order to attract subscribers from other networks. Today of course, all operators are trying to leverage the benefits of MNP.

In fact, the “No Idea, Get Idea” campaign launched by Idea Cellular in late 2010 has seemingly worked to the company’s advantage. Within the first eight days of implementing MNP, Idea witnessed a net subscriber addition (difference between the number of subscribers who left and those who joined) of 12,300. Vodafone Essar was the second biggest gainer, with a net addition of 11,252 subscribers, while Aircel came a distant third with 3,389 net additions. MNP didn’t seem to have much effect on Bharti airtel, with the country’s largest operator managing a net gain of only 94 subscribers.

The operators that lost users were Reliance Communications (on both GSM and CDMA), followed by state-run Bharat Sanchar Nigam Limited and Tata Teleservices (on both GSM and CDMA). Reliance Communications, for instance, lost 9,837 users while only 192 chose to join its network.

However, these are early days, and neither telecom operators nor analysts expect the spike in churn rates to last for long. Given the multiple-SIM phenomenon and rock-bottom call rates, there is likely to be little motivation for the majority of subscribers to consider shifting operators frequently. Industry experts believe that churn rates due to MNP may eventually not exceed 1 per cent as against the current 4-5 per cent.

However, MNP’s greatest contribution would be that it would force operators to shift their focus from acquiring new users to retaining the existing ones by providing better and more innovative services.

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