Impact of mobile number portability on service providers to be limited: Fitch

Fitch Ratings today said that the introduction of mobile number portability (MNP) in India's wireless market is unlikely to have a significantly negative impact on the operators, considering the market's dominant pre-paid nature and existing high churn rate.

It said that MNP was likely to intensify competition in the post-paid segment, and as this segment only represents 5 per cent or less of the total wireless subscribers, the negative impact of higher subscriber acquisition and retention costs for this segment on overall operating margins would be limited.

The implementation of MNP in India, originally scheduled for 2009, will now be implemented in a phased manner starting with the state of Haryana, where MNP services commenced from 25 November 2010, and reaching the entire country by 20 January 2011 (See: Mobile number portability launched in Haryana's Rohtak; fee fixed at Rs19)

The agency expects that the pricing pressure, which has so far been more on the pre-paid segment of the market, will spread to the post-paid segment with MNP, though to a lesser extent. Also, new entrants and smaller wireless telcos will now be afforded a stronger chance to compete against incumbent leaders in the post-paid segment, where the annual churn rate is only 12 per cent to 24 per cent compared with 50 per cent to 70 per cent in the case of prepaid.

The post-paid segment boasts an approximately 40 per cent higher average revenue per minute (ARPM) than the pre-paid segment. While subscriber acquisition as well as retention costs may increase in this segment over the next 12 months, Fitch anticipates that they would normalise over the medium-term.

The agency also expects post-paid subscribers to display a certain level of stickiness towards the strong brand names of the leading players, and hence the churn only for minor pricing differnetials would be limited.