Will number portability benefit cellular operators?

Subscribers will soon be able to change their mobile service provider without their number undergoing a change, or what the industry calls number portability. CNBC-TV18 reports.

According to telecom minister A Raja, number portability will be introduced in the four metros to start with. It will become operational by 2008 March-end. The introduction of number portability, in category A circles, will be reviewed in April 2008. It will be permitted only within the same service area. The method of tariff transparency will be decided by TRAI and operators will have to bear the cost of upgrading their networks to support number portability.

The Cellular Operators Association of India, (COAI), said that MNP should be introduced across segments and pan-India. It added that MNP introduction will benefit a "select" operator.

Earlier, the Telecom Regulatory Authority of India, (TRAI), had said that mobile number portability should be adopted, reports Newswire 18. TRAI had added that mobile companies could not survive on 3G services alone.

Come March 2008, subscribers in the four metros will be able to change their service providers without changing their numbers. Analysts said that this move is great for consumers, but not for some of the operators. A section of the industry, mostly service providers in the CDMA segment, has welcomed this move.

Anil Ambani, chairman, Reliance Communications, made a statement welcoming the move. He stated that this is the first time GSM operators will be facing real competition in four metros. That is because Reliance Communications is now planning an entry in to GSM, and with number portability, that could provide an impetus to its GSM plans.

According to reports from HSBC, number portability is almost a prerequisite for Reliance''s GSM foray.

Similarly, even for Tata Teleservices, the step will be beneficial because the company will also make an entry into GSM. For other operators, it is going to be a little mixed. The GSM industry lobby, COAI, has welcomed it with a sense of scepticism.

It has said this should have been across the board or across segments, which means that you should be able to move from fixed line to mobile as well. They say it should have been done pan-India and not just restricted to four metros, as is the case right now.

They also said that they believe that this is being done with an intention to help or aid a particular operator. So, clearly they are referring to Reliance Communications in this case.

But empirically, it has always been a big negative for the large dominant operators; at least that is what empirical evidence suggests in some of the other countries. There has usually been a churn of about 10 per cent to 15 per cent immediately after the introduction of number portability because of the quality of service being constrained by the availability of spectrum.

But quality of service across service providers is not really great. The primary reason why consumers tend to be sticky is because they do not want to let go off their number. If number portability were to be increased, there could be a lot of churn in the industry.

An operator like Bharti has a lot of the high ARPU post paid subscribers. These are subscribers who came into or bought subscription years ago, maybe in the late ''90s and paid a very high price to get that subscription. There are also consumers now with high ARPU. They will now be tempted to move away from their existing service providers to try some of the newer service providers. So, it could be marginally negative for a company like Airtel.