Mobile Number Portability: Much Ado about Nothing?

Does Mobile Number Portability (MNP) work? MNP has yielded mixed results since its introduction in a number of markets across the world. Regulators pushed MNP to increase end-user choices, drive improvements in customer care and quality of service by making it easier for subscribers to leave networks. For mobile carriers, the nightmare scenario was a commoditized marketplace in which subscribers switched at will from network to network, driving dramatic increases in churn rates and impairing cash flow predictability in the process. But for a few exceptions (Hong-Kong and Scandinavian markets), this just has not happened, for reasons ranking from half-hearted implementation to the sanctity of contracts and customer indifference.

To this point, MNP has had a fairly limited impact in most of the markets in which it was introduced, owing to half-hearted implementation, the sanctity of contracts and customer indifference.  We analyzed nearly 15 markets in which MNP was implemented in the past 6-7 years; overall, the impact has been mixed. A look at the evolution of subscriber churn rates over the first 24-36 months following the introduction of MNP shows limited upward movement in the churn rate curve; indeed, churn remained stable and in some cases, even declined, suggesting that MNP did not dent carriers’ efforts to improve subscriber loyalty. A number of factors have been working against MNP. First, operators have pushed it half-heartedly, out of concern for driving up their own churn rates. In some markets, the portability procedure is not customer-friendly; carriers impose portability fees, there is often paperwork, and in such markets as Singapore, there have been technical difficulties, with some services not translating seamlessly from network to network. Contracts are an additional factor impeding MNP; in mature markets, half or more of the subscriber base is locked in contract periods ranging from 6 to 24 months, with stiff penalties for breach of contract. The relative similarity of pricing packages and services also removes incentives for subscribers to switch. For many, it’s just not worth the hassle.

MNP has worked in some cases; the most impactful implementation of MNP has been in Scandinavia –most notably Finland and Denmark, and in such markets as Hong-Kong.  In Finland, churn jumped by 10 percentage points after the introduction of MNP. Hong-Kong saw similar increases in churn, and remains characterized by churn rates in the 40%-50% range. In these cases, the markets are either predominantly prepaid or have very short contract periods and no portability fees, making it easy to switch. Another characteristic is the intensity of competition; Hong-Kong has 6 operators (battling for 7-8m customers) and 6 small MVNOs. Competition in Finland and Denmark is similarly intense, with MVNOs accounting for 25% and 15% of the overall subscriber base respectively, and service offerings that vary substantially from one operator to the next. In Finland, up to half of ported subscribers go to MVNOs, in a given period.

The key lesson is that MNP alone is hardly sufficient to expand end-user options and make markets more competitive.  If a market is not competitive to begin with, MNP will have a limited impact. Indeed, the markets in which MNP has driven up churn are markets that already exhibited high churn rates and low subscriber loyalty; MNP just made the switching process easier. To be effective, MNP should therefore not be used in a vacuum, but along with other regulatory tools. As a regulatory tool, MNP is also important to improve individual operator quality of service. Ultimately, the best case scenario for a marketplace is one in which end-users have the needed flexibility to migrate networks if they want to, with operators raising their overall quality of service to make switching networks an unappealing option.