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September 13, 2010
After months of delays, we could see mobile number portability (MNP) in India as early as October of this year.
What broke the logjam? To ensure that operators embrace MNP, the government announced last month that operators can only start offering 3G services when their networks can accommodate portability. Given the billions of dollars operators have spent on 3G spectrum, and the billions more that will be spent on network buildout, we believe that the government’s threat will incent operators to introduce MNP as quickly as possible.
MNP has had mixed results in other Asian markets, with South Korea and Hong Kong seeing sharp increases in churn as a result of MNP and others, such as Taiwan and Singapore, seeing little impact from the introduction of MNP. Given continued high growth in India, an ultra-competitive environment with 15 operators vying for subscribers, India’s status as a predominantly prepaid market, and a history of high churn rates, we believe that MNP will likely impact operators’ financials in the short term.
India is the fastest growing mobile market in the world in terms of monthly net subscriber additions, an average of 18.4m a month for the first six months of 2010, and consequently its growth and immense untapped market makes it one of the most attractive mobile markets globally. It is no surprise that the market has attracted 15 service providers, well above the average 3-4 seen in other markets.
The combination of high growth and a large number of operators vying for subscribers means that operators have already engaged in a series of price wars and other aggressive tactics to lure subscribers away from each other. Churn in India, which stood at 57% in 2009, is among the highest in the world. Lower prices, combined with higher churn rates and increased expenditures related to marketing and network investment, is impacting profitability.
Furthermore, we expect the prepaid market, which accounts for over 94% of total subscriptions in India, to embrace MNP almost immediately, with postpaid subscribers coming on board as contract periods lapse. One of the most significant barriers to switching providers — the fear of losing one’s personal phone number — will be eliminated. With the porting fee locked at US$0.40 per account, low by international standards, the barrier to switching is virtually non-existent. With competition increasing, investment requirements on the rise, and added challenges coming from regulatory moves like MNP, we believe that operators will face increasing pressure to merge and consolidate. May the strongest prevail.
— Daniel Yu, Associate Manager
Related resources:
India Mobile Handset Forecast
This forecast is updated quarterly.
India Mobile Demand Forecast
This forecast is updated quarterly.
Mobile Number Portability May Trigger Big Changes in Latin American Markets
This Insider explores the reasons for regulators in Latin America to implement portability and the approach that operators of different sizes have taken to cope with MNP. We discuss the impact that the measure has in the market, the strategic approaches taken by small and large operators and their outcomes.
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Pyramid Points
