CHAPTER 2 MOBILE NUMBER PORTABILITY

CHAPTER 2 MOBILE NUMBER PORTABILITY

CHAPTER-2 MOBILE NUMBER PORTABILITY This chapter elaborates the important concepts of mobile number portability behind the research study. This part will throw light on Mobile Number portability, (MNP) its role and significance and the present status of telecom industry in India. MNP is important for telecom markets because it expels a bar to switching that keeps those with much equity in the number specifically many business users prisoner behind a high switching barrier. The reduction in barriers to switching is of particular benefit to challenger carriers against dominant incumbents. Typically, when MNP is implemented in a country, a rise in churn follows. Mobile Number Portability (MNP) allows subscribers to retain their present mobile telephone number when they switch from one service provider to another or from CDMA to GSM or vice versa of the same service provider. MNP has the potential to expand benefits to consumer in the form of heightened competition for premium subscribers. MNP results in lower barriers for competition. MNP was licensed in India in April 2009, and was launched after a long wait in January 2011. 2.1 INTRODUCTION Mobile number portability has brought a noteworthy shift in telecom world wherein a product which had all the features of consumer durable suddenly has taken control over the features of consumer nondurable. Telecom sector per se has been there for some time now in India. Still it is a growing sector which is undergoing fundamental advancements and is evolving due to innovations in

Mobile Number Portability 38 underlying technology. The lack of future road map makes it an interesting field for research purposes. One such area that has cropped up very recently is the result of introduction of Mobile Number Portability in India. For most of the time of its existence it was fixed line wired telephone. Always struggling high costs, low profitability. It was a sector either with government or loss riddled industry (Singh Sk 2008) 1. In the 1990s suddenly when nobody expected a hitherto ignored wireless telephony took centre stage. In a very short span wireless telephony by now known as mobile phone industry caused revolution by the fact that the number of mobile-phone subscriptions surpassed that of fixed subscriber lines. Telecom industry in India has outlined a unique example of its progress from a well regulated to a liberal economy with presence of state even in most dynamic, innovative field. India today offers state of art telecom services at most competitive rates in the world. The telecom density has increased recently from close to half per 100 to 81.38 per hundred. The mobile telecoms business emerged as the healthiest and most robust of the business sectors contributing 3.75% of Indian GDP (TRAI report June 2015) 2. Were it not for the huge license fees paid, the mobile phone business may have even be the most profitable venture in corporate history of India (McDowell & Lee, 2003) 9. TELECOM INDUSTRY IN INDIA India is an emerging economic power and the second largest and fastest growing mobile market in the world with nearly one billion subscribers (TRAI report June 2015) 2. While there is a lack of physical infrastructure, mobile

Mobile Number Portability 39 communications is taken to be imperative element in today s environment. The telecommunications market in India is unique from a global perspective. As per DOT, India has 15 mobile carriers in a highly competitive, predominantly pre-paid market. This market is largely driven by the picky subscriber. About 97% of all mobile subscribers have prepaid service, Punjab is part of circle B which has prepaid rate higher than national average and those subscribers keep on changing their carriers. Unlike most of west, India has handsets which can work with different SIMs (as handsets are not provided by most of service providers) (Nakamura, 2010) 3. Thus there is no hindrance for mobile subscriber to switch operators by activating the new SIM card. Subscribers propensity for churn and low loyalty to operator creates foremost challenges on mobile service providers in India, majorly due to subscribers having no-contract pre-paid accounts. These take the form of high churn rates and smaller revenue per user. The monthly churn rate in India averages approximately 6% and the Average Revenue Per User (ARPU) in India is Rs. 120 (BMI India Telecommunications Report 2015) 4 a month, which is among the least in world. Telecom industry of India was growing at a high annual growth rate which lately is showing signs of fatigue. While total Wireless subscriber base increased from 851.70 Million in June 2011 to 1009.46 Million at the end of December 2015, registering a relatively smaller monthly growth of 0.78% as per TRAI Report. This was the time the data collection for the study was started. As per TRAI, the Teledensity has increased substantially from 4.3 in March, 2002 to 81.8 in May 2016, with the rural areas registering an increase from 1.2 in March 2002 to 50.8 in May 2016.

Mobile Number Portability 40 Figure 2.1 Total Number of Subscribers in India till 2016 (Source: www.telegeography.com) There were 442 million wireless subscribers as of July 2014, with a very high Compounded Annual Growth Rate (CAGR) during the 2004-2014. As long as it was fixed line only the CAGR was not very high and is clear from figure the introduction of mobile telephony brought big changes in subscriber base. The telecom industry in India was always facing a prospect of S curve* (Singh, 2008) 1. S curve refers to a curve which follows a path of slow growth which turns into exponential growth which gets tapered off in the end giving it a look of elongated S. This tremendous growth had attracted many national and international Telecom services providers. Telecom companies battling for supremacy and profits have started to focus on subscriber retention than on acquisition which earlier used to be a norm. The telecom sector has finally come of age with implementation of mobile number portability. This belated regulation is changing the trends in telecom market. Mobile Number Portability requests were 4.40 Million Lacs subscribers at

Mobile Number Portability 41 the end of March 2016. India has welcomed and enjoyed these regulations which have brought a sense of competition back in telecom industry. Telecom industry has not only attracted the investments, but also academic researchers. Telecom service providers are not only focusing on new customers for maintaining their financial performance but also are striving to stop subscriber churn. Many researchers have associated subscriber retention with sustainable financial performance, for instance, Many researchers worldwide have viewed customer retention as one of the factors that can increase market share. (Yankee Group, 2001) 5 indicated that mobile operators calculate the cost of acquiring a fresh client is seven times more than the annual cost of retaining an existing subscriber on an average basis. Normally, mobile operators in vibrant technological environment find it inexpensive to retain their customer base rather than formulating strategies to acquire them. 2.2 SUBSCRIBER CHURN As per (Yankee group, 2001) 5 Churn refers to the tendency of cell phone subscribers to switch service providers. Subscriber churn is a basic unit of the telecommunication industry, which is used to describe customer loss, more precisely defined as the gross rate of customer attrition during a given period. It assesses a service provider's customer retention efforts and provides an insight into the development or decline of the subscriber base as well as the average length of participation in the service (Maicas et al 2009) 6. In the telecommunication industry, customers are able to choose among numerous service providers, thus actively practicing their right to switch from one

Mobile Number Portability 42 operator to next. There is a significant relationship between customer loyalty, customer satisfaction, trust and switching costs in the mobile telecom market (Shi, Zhou, & Liu, 2010) 7. In this fiercely competitive arena, subscribers demand customized products and better services at lower costs, while service providers focus on customer acquisition as their prime business objective. Customer retention has become the key business issue for telecom companies, which are trying to focus on the ways to satisfy and retain customers due to saturation in markets. Rao et al (2005) 8 recognized the relationship between quality, satisfaction and loyalty. They found the relationship to be a positive one wherein better quality would lead to higher satisfaction. Higher satisfaction with a brand would further result in loyalty towards the said brand. Customer satisfaction can be helpful in maintaining customer base. (Mc Dowell & Lee 2003) 9 have found out the determinants which would influence subscriber satisfaction like, price, call quality, perceptions, values, network coverage and network availability. (Sanguansintukul & Lursinsap, 2008) 10 found that measure and management of customer lifetime value (CLV) for deciding the likely future profit from the customer is vital and important. Researchers have given special attention to examine the relationship between loyalty, churn and profitability. These studies have mainly attempted to investigate the determinants of customer satisfaction which help the mobile operators to maintain their customer base and found that factors like price, call quality, perceptions, values, network coverage and network availability are fundamental to sustain with in a competition. As per research, Technology and Innovation turn out

Mobile Number Portability 43 to be more important determinants of corporate competitiveness and the telecommunications sector is no exception. (Steenkamp & Benedict 1989) 11 investigated the effect of MNP on switching costs in mobile phone services and found that as such the greater part of regulatory policies are designed to reduce switching costs. 2.3 ROLE OF MOBILE NUMBER PORTABILITY One of the most grounded anchors for keeping good customers and preventing churn is the mobile phone number. (O Malley et al 1991) 12 while studying MNP in United States pointed out that if number portability is not a possible option, then for many users a mobile phone number commits that person to the network. The trouble of changing numbers in itself is not such a strong deterrent, but the fact that everybody needs to be informed of the changed number makes the whole activity undesirable. For business clients, and all who depend on the mobile phone for work, etc., the change of numbers could mean lost business. Mobile Number Portability (MNP) allows subscribers to retain their present mobile telephone number when they switch from one service provider to another or from CDMA to GSM or the other way round of the same service provider. MNP has the potential to increase advantages to consumer in the form of heightened competition for premium users. MNP results in lower barriers for competition. MNP was licensed in India in April 2009, and was launched in January 2011. By this time, MNP was quite common with over 70 countries worldwide having already implemented portability solutions as per Yankee Group. TRAI used a lesser used multiple-administrator solution for MNP. Two MNP administrators are dually

Mobile Number Portability 44 responsible for synchronizing the transfer of telephone numbers between mobile carriers, each utilizing own platform and infrastructure in different zones. As prescribed by the regulator, TRAI, India s MNP framework follows those regulations (Department of Telecommunications): The MNP framework is limited in scope i.e. it only allows mobile subscribers to carry their mobile numbers when moving to a new service provider. Similar services do not extend to fixed landline or other services. The MNP process is started by the recipient service provider at the request (via SMS) of the user. Subscribers begin the porting process by procuring a Universal Porting Code (UPC) from their zonal MNP administrator (MITS or Syniverse), and presenting that code to their new service provider. The UPC is delivered via SMS only. Only upon verification of subscriber identity (address proof and photo Identity) next service provider starts the processing of porting request. TRAI requires that the whole process for subscribers to switch carriers be finished within seven working days. The process results in the subscribers service outage for up to two hours during the transition to their new service provider. The balance in prepaid account is not transferred, but retained by the old service provider. Updated routing is the ownership of the operators and consumers have no role to play in it. Apart from giving the subscribers a genuine alternative to change their network service provider / technology (without changing their mobile number), the introduction of MNP also helps in increasing the competition between the service

Mobile Number Portability 45 providers. (Shin et al 2008) 14 found in Europe that MNP acts as a catalyst for service providers to improve their quality of service, introduce new & innovative products & services and enhance the mobile network coverage. With the number portability the barrier of a new number has become nonexistent wherein one is able to change subscriber without changing his number. (McDowell & Lee, 2003) 9 believe that managing churn will be perhaps the biggest competitive challenge in 4G. Success with it will determine to a very large degree the eventual winners of the 4G market. Successful churn management will require professional marketing consistently performed, with lessons learned and applied over time. 2.4 GLOBAL EXPERIENCE S - RELEVANCE IN INDIA India has the second largest base of subscribers in the world after China. At the same time mobile penetration world over is very high and is marked by different CAGRs in different countries. In 1997, Singapore became the principal nation to implement mobile number portability (MNP), having already implemented fixed line portability. Singapore s MNP was based on easy and inexpensive call forwarding, requiring the subscriber to hold two telephone numbers. In contrast the technology by now has become really sophisticated. The MNP being offered in India has different attributes and environment as compared to worldwide experience (Yankee group, 2001) 5. Chronologically India is very late entrant into this technology. India also serves a large population (Billion plus), unlike most of Europe and Americas. India s subscriber makeup is also distinct differing in the sense of largely postpaid markets of Europe to a dominantly prepaid market.

Mobile Number Portability 46 Figure 2.2 International telephone subscribers (Source: www.telegeography.com ) India also has a distinction of having very high level of prepaid subscribers with very low ARPU as compared to world averages (Fig 1.6). Indian experience of mobile telephony little postpaid contracts is different from world. Having large number of operators competing with each other on price, the charges per minute are among lowest in world. TRAI the regulator in India has chosen unique Implementation choices in terms of technology, fee structure, porting time, rejection reasons and user implementation process. In all the telephony environment and ground conditions in India are distinct and as such MNP implementation has little in common with the rest of world.(ranka, Tsalikis and Seaton, 2006) 15

Mobile Number Portability 47 2.5 MOBILE NUMBER PORTABILITY TERMINOLOGY: Donor operator: It is the operator from whom the number is porting-out. Recipient operator: It is the operator that would provide services to the customer after porting. Number Portability Database: It is the repository of all the ported numbers. It provides a unique routing number in response to a query from any network operator. Routing number: A unique number stored in the number portability database that is used to route the call to the recipient operator. 2.6 MOBILE NUMBER PORTABILITY IN RAJASTHAN AND OTHER CIRCLES: In the month of March 2016 alone 4.40 Million requests have been made for MNP, as per data of TRAI. "In MNP Zone-I (Northern & Western India) maximum number of requests have been received in Rajasthan (about 18.32 Millions) followed by Gujarat (about 16.08 Millions) whereas in MNP Zone-II (Southern & Eastern) maximum number of requests have been received in Karnataka (about 23.42 Millions) followed by Andhra Pradesh Service area (about 20.01 Millions), the report added. During March 2016, the active wireless subscribers of Peak VLR (Visitor Locator Register) stood at 90.60% of the total subscribers at 1033.63 Millions, it added. A visitor location register (VLR) is a database that contains information about the subscribers roaming within a mobile switching centre s (MSC) location area. It is an indicator of active wireless subscribers of a mobile network. According to the data, Idea leads the tally in VLR with 101.79%, followed by Bharti Airtel at 96.16% and Vodafone at 95.70%. Meanwhile, Loop has the

Mobile Number Portability 48 lowest proportion of VLR with 48.85%. Circle-wise, West Bengal has the highest proportion of VLR subscribers with 92.91% followed by Maharashtra (92.19%) and Assam (90.40%). Tamil Nadu (incl. Chennai) has the lowest VLR proportion with 75.82%. Meanwhile, the wireless subscriber base across GSM, CDMA and FWP platforms have increased from 88.63 crore in December, 2013, to 89.33 crore at the end of January, 2016, registering a monthly growth of 0.79%. While the number of urban wireless subscribers increased from 52.67 crore to 58.79 crore during the same period, the number of rural subscribers base increased from 35.97 crore to 44.48 crore, TRAI data said. The urban wireless Tele-density has increased from 138.94 to 148.73 and rural Tele-density has increased from 41.95 to 50.88 during the same period. At the end of March 2016, private operators held 91.30% of the wireless subscriber market share where as BSNL and MTNL, the two PSU operators held only 8.70% market share, the TRAI document stated. Among the private operators, Bharti Airtel had 24.31% of the market share, while Vodafone had 19.15% of the market share followed by Idea and Reliance at 16.94% and 9.91 % respectively, during the above mentioned period. The market leaders Bharti Airtel added 25, 47,018 new subscribers while Vodafone added 12, 00, 472 subscribers, and Idea reached out to 4,46,551 new subscribers, during March 2016. Aircel and Reliance meanwhile added 4,08,834 and 5,02,597 new subscribers respectively during the same period. 2.7 CONSUMER BEHAVIOUR AND MOBILE NUMBER PORTABILITY The main purpose of this study is to comprehend the customers behaviour towards the choice of changing their existing service provider and the strategies used by the telecom companies to pull the customers towards themselves and to retain

Mobile Number Portability 49 their existing customers. The regulatory bodies like Department of Telecommunications (DOT) and Telecom Regulatory Authority of India (TRAI) have facilitated the cell phone users to freely roam among desirable services by retaining their existing mobile numbers and also to avail different technologies like 2G, 3G, 4G, CDMA and GSM or post- paid and pre-paid. MNP has brought many new prospects in the telecom sectors which for sure are going to exaggerate the competition in market to pull each other s customers and retain their existing customers as well as it would end the existing monopoly of several big players in the telecom sector and would be a leverage to ascertain the best possible services to the common mobile users in the country. This competition has emerged into the better services provided by the telecom operators as well as introduction of newer technologies like 4G, etc. to attract the customers. Telecom operators today are doing lot of research to understand the value added service requirement of the customer. Various mobile applications have been launched with the accessibility of smart phones. The prices of these phones are most reasonably priced with competition at its peak. Consumers today are happy as they can customize their phone using several applications available at no cost or at very small costs. Not just the cell phone but MNP has made the customer a Boss allowing him to preserve his mobile number along with his own preferred type of mobile. Telecom industry being a capital intensive business needs enormous capital every year for its development and spread. It involves huge cost towards maintaining and building-up of network infrastructure. However, the government has realized the blow of cost on slow growth of telecom sector and permitted various operators to

Mobile Number Portability 50 share infrastructure. The various telecom service providers are partnering to minimize the duplication of cost and attempt, bringing about major financial and operational savings, thus leading to better margins. This is in support of the operators and the customers as the some of the benefit of cost is passed on to customer s pot also. Every month, on an average of 12 million subscribers is getting added to the subscriber base. To sustain this growth, operators need to increase their backend infrastructure. With the 4G spectrum, the requirement for more sites to support the launch of new products and services by operators has put added pressure on the current infrastructure with the mobile service operators. (Zeithaml et al, 2006) 16 In addition to this, there is enormous possibility for the industry to capture untouched rural market lying with future business possibility. To tap the rural market of India, which is spread over an enormous geographical area, operators need vast capital to invest in the building-up of the network. Hence, infrastructure partnering is the only way out to increase operations in rural market without a lot of speculations. Allowing infrastructure partnering is a clear example of how the Government policies can alter the entire scenario of how an industry operates and grows and how it profits the eventual consumers. This judgment has played an essential role in such a remarkable growth of telecom industry in India. It is also notable that to maximize the benefits of 3G and 4G services, government should permit spectrum sharing so that these services would be obtainable in all the circles with least expenses.

Mobile Number Portability 51 However, whether the market is flooded or not or whether the mobile operator is handing out freebies or not, the Indian consumer is not shy to move away from his home network in search of greener pastures with other network operators. Whether it is for a better network coverage or better tariffs and SMS rates or simply for high-speed internet, mobile number portability has come as a benefit to mobile subscribers in India and they are enjoying it. Therefore the current research study is framed to analyze the following objectives: To determine the level of awareness of Mobile Number Portability amongst rural mobile users. To analyze the level of satisfaction of rural mobile users with their current service providers. To study the expectations of rural mobile users from service providers.

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