Final Report

Seminar on Contemporary Issue

On

Retaining Brand Loyalty of subscribers after implementation of mobile

number portability in India.

Submitted by: Harshil Dave (7076)

Submitted to: Prof. Govinda Sharma

Date: 10th Sept 2008

Retaining Brand Loyalty of subscribers after implementation of MNP in India 1

Executive Summary:

India is the fastest growing telecom market, averaging over 6 million subscribers every month India is
among the four nations with over 150 million mobile subscribers. The mobile industry grew from 99 million
subscribers in March 2006 to 166 million in March 2007. Indian telecom services contribute about 2.71% to
India’s total GDP.
Although these figures might indicate that Indian mobile industry is ‘In the Prime of Youth’ but still it faces
challenges from external market forces. Challenges such as; changes on the regulatory front, changes in
license fees, increased competition because of entry of international players. Currently the situation which
mobile service providers are facing can be described as ‘double whammy effect’, on one hand there are
strict regulations and promotion of competition by the telecom regulator TRAI, and on the other hand
telecom companies are catering to a very price sensitive population. This is exerting pressure on telecom
companies from both sides. One development which is due to occur by the end of year 2008, i.e.
implementation of Mobile Number Portability (MNP) poses a big challenge to the incumbent service
providers. And the challenge is to retain the brand loyalty of subscribers after the implementation of MNP in
India.
This report commences by providing the basic understanding of MNP and how it operates. And it further
goes on to explain how service experience mapping can be used to improve operations followed by study of
implementation of MNP in other countries. Later, the report highlights some of the summary findings of
Indian GSM and CDMA operators. The methodology adopted for purpose of the study is partly by study of
secondary data and partly by collection of primary data. In light of the study of secondary data and primary
data collected by marketing research, this report provides recommendations for the service providers to
retain the brand loyalty of subscribers after implementation of MNP in India.

Retaining Brand Loyalty of subscribers after implementation of MNP in India 2

 Acknowledgement

I sincerely thank the staff and management of Reliance telecommunications in Devraj Urs road, Mysore for
providing necessary information regarding the study.
I take this opportunity to express my profound gratitude and deep regards to my faculty guide Prof. Govinda
Sharma for his exemplary guidance, monitoring and support throughout the course of this project.

Harshil Dave

Retaining Brand Loyalty of subscribers after implementation of MNP in India 3

List of abbreviations:

MNP – Mobile Number Portability

CDMA – Code Division Multiple Access
GSM – Global System for Mobile communications
WLL – Wireless Land Line
TRAI – Telephone Regulatory Authority of India
ARPU – Average Revenue Per User
DoT – Department of Telecommunications
MOU – Minutes of Use
RPM – Revenue per Minute

Retaining Brand Loyalty of subscribers after implementation of MNP in India 4

List of Figures:

Title Pg.No

Pictorial depiction of functioning of MNP 09

Service operations conceptual model 13
Service operations improvement 14

Retaining Brand Loyalty of subscribers after implementation of MNP in India 5

 Table of Contents
Title Page No.
Executive Summary 02
Acknowledgement 03
List of abbreviations 04
List of figures 05
Chapter 1.0 Overview of Indian Telecom Industry 07
Chapter 2.0 Introduction 08
2.1 Pictorial depiction of how porting works 09
2.2 Cost of implementing Mobile Number Portability 09
2.3 Business opportunity presented by MNP implementation 11
2.4 Recommendations by TRAI 12
Chapter 3.0 Mapping subscribers’ service experience to improve operations 13
Chapter4.0 Study of MNP implementation in other countries 15
4.1 Issues in implementation of Mobile Number Portability 16
4.2 Challenges MNP will present to incumbent network service providers 17
4.3 Benefits customers will derive after implementation of MNP 18
4.4 Strategies used by Telecom companies of other countries
to retain subscribers after MNP 18
4.5 Centralized Number Databases, how they’ll work? 20
4.6 Entities who will handle number porting requests 20
4.7 Time to port number 21
4.8 Economic Arrangements for Number Porting Procedure 22
Chapter 5.0 Summary Findings 24
5.1 Summary Findings for GSM Operators 24
5.2 Summary Findings for CDMA Operators 25
5.3 Analysis based on summary findings 25
Chapter 6.0 Conclusion and Recommendation 27
6.1 Conclusion 27
6.2 Recommendation 27
References 29
Retaining Brand Loyalty of subscribers after implementation of MNP in India 6
Chapter 1.0 Overview of Indian Telecom industry:

• Total telephone subscribers cross 256.55 million at end of October 2007.

• Growth maintained in wireless segment
• Teledensity 22.52%
• Total wireless subscribers (GSM, CDMA, & WLL (F)) base reaches 217.14 million at end of
October 2007.
• In wireline segment, subscriber base decreased to 39.41 million in the month of October 2007 as
against 39.598 million subscribers in September 2007.

(Source: TRAI Press release No. 96/2007)

Additional Information:

• Call charges still remains to be lowest in India when compared to other countries.
• On a numerical basis, India is the largest growth market, adding about 6 million mobile phones
every month.
• India expects to reach 500 million subscribers by end of 2010.
• India is the third largest mobile population in world only behind China and the USA.

Retaining Brand Loyalty of subscribers after implementation of MNP in India 7

Chapter 2.0 Introduction:

What is MNP?

MNP in its simplest form is the ability to retain subscribers’ phone numbers when changing the subscription
from one mobile service provider to another. It allows competition by allowing consumers to switch service
providers, yet retaining their old mobile phone number. As a result, service providers will need to actively
compete, and provide innovative as well as improved customer service, in order to retain and expand their
subscriber base. True number portability is when the same mobile number from the previous service
provider is retained for usage even after changing the service provider. There is also the ’mobile number
forwarding service’ that is currently being used in Singapore, where a new mobile number is issued by the
new service provider, and is used along with the previous mobile number from the previous service
provider.

If everything goes according TRAI (Telephone Regulatory Authority of India) plans, India will see an
introduction of MNP (Mobile Number Portability) by next year i.e. 2009. TRAI has planned to implement
mobile number portability on grounds that number portability benefits subscribers and encourages quality of
service among operators. TRAI asserts that in India only thing that is increasing in telecom sector is
subscriber base, everything else like ARPU (Average Revenue Per User), Customer Service, and service
quality is dropping. According to TRAI in some circles, call completion rate (ratio of successfully
completed calls to total number of attempted calls) was below 15%, which means that call fail rate was
approximately 85% in those circles. All these indicators are highlighted by TRAI to infer falling level of
service being provided to the subscribers. TRAI has also made some recommendations for implementing
MNP in India.
Mobile Number Portability was first implemented by Singapore in year 1997. Hong Kong was second to
implement MNP in year 1999, followed by Australia in 2001, South Korea in 2004 and Taiwan in 2005.

Retaining Brand Loyalty of subscribers after implementation of MNP in India 8

2.1 Pictorial depiction of how porting works:

Fig: 1.0
Pictorial
depictio
n of
function
ing of
MNP

We can
see that
before porting when subscriber 1 calls subscriber 2, the call is routed directly to subscriber 2 through Mobile
Network ‘A’. But when subscriber 2 ports from Mobile Network ‘A’ to mobile Network ‘B’, his number
remains the same; but now when subscriber 1 calls subscriber 2, the call will be routed from mobile network
‘A’ to mobile network ‘B’ and then call reaches subscriber 2. This is how mobile number portability works.

2.2 Cost of implementing Mobile Number Portability:

According to TRAI’s analysis, even if the entire cost of infrastructure, porting, and number administration is
charged to the porting customer, the cost should work out to a single time charge of Rs. 200. This will
enable operators to recover entire cost within three years.

There are several categories of costs associated with implementing mobile number portability:
The administrative cost each time that a number is ported;
The establishment and operating costs associated with running a database containing details of ported
numbers, whether that database is a centralized or a distributed one;

Retaining Brand Loyalty of subscribers after implementation of MNP in India 9

 The costs of additional conveyance of calls to ported numbers in the case that they must transit the mobile
network originally associated with a ported number; and
The costs of database dips in the case that this is required to determine the correct network to which a call
must be routed

If the benefits of portability of mobile number are relatively less substantial than for other types of numbers,
than the success of mobile number portability is likely to depend on other factors such as how simple and
inexpensive the implementation of portability is, relative to the value users put on their numbers and
retention of them. (Electronics Communication committee, Implementation of MNP in CEPT countries,
March 2003).

What is ‘All call Query’ model?

Routing of a call directly from the originating network to the correct terminating mobile network, which
requires the former to determine what is the appropriate network for a given number is called ‘All Call
Query’ model. The mobile network that was originally associated with a given number is involved in the
routing of a call to the correct terminating mobile network. In India this model will be used to implement
mobile number portability.

Retaining Brand Loyalty of subscribers after implementation of MNP in India 10

Table 1.0 Estimated investment required for implementing MNP
MNP implementation estimates – All call query Model
Using SS (in $ mn) Using SS7/ IP via Sigtran (in $ mn)
Total cost for setup pan-India 208.6 182.97
Cost of upgrades
• Switch Upgrades
• Switch software
upgrades
• Additional signaling
circuits
Total CO upgrades 175 154.6
Software costs
• Order management
sys upgrade
• Provisioning and
billing
• Database upgrades
Total software costs 22.5 22.5
SCP/STP costs 10.4 4
Total cost of setup pan-India 416.5 364.07

2.3 Business opportunity presented by MNP implementation:

Because of implementation of mobile number portability the resulting business opportunity for the
following category of vendors is clear:
• SS7 Hardware vendors
• SS7/IP – SIGTRAN gateway vendors
• STP/SCP solution vendors
• Telco billing and provisioning vendors
• Carrier class database solutions vendors
Retaining Brand Loyalty of subscribers after implementation of MNP in India 11
 • Large multi-carrier NPAC/ Clearing house operators/ System integration houses.

2.4 Recommendations by TRAI:

1. Recommendation to government approval to actual launch of service: 12 months and therefore MNP
shall be implemented within 12 months of government approval.
2. Implementation is recommended in phases from metros and ‘A’ category cities to smaller towns.
3. All call Query method to be implemented for MNP.
4. Mobile operators will work with a neutral 3rd party to setup a central number database with multiple
regional nodes. The cost of this shall be borne by the operators in proportion of subscriber base.
5. Customer shall approach the recipient operator for porting and only recipient operator shall be
permitted to charge a fee for successful porting.
6. Common setup costs for NPAC (Number Portability Admin Center), clearing house will be borne by
operators based on subscriber market share at the time of implementation.
7. Porting time should not exceed 3 working days from the date of request from the porting by
customer.
8. One step process should be adopted: this means that the customer should simply approach the
recipient operator with request to port. Not the two step process where the customer has to first
request cancellation from current service provider and the service provider tried to ‘win-back’ with a
better offer or delays the process for variety of reasons.

Retaining Brand Loyalty of subscribers after implementation of MNP in India 12

 Chapter 3.0 Mapping subscribers’ service experience for operations
improvement

Mobile telephony, just like most other services is one of the services where high participation of subscribers
is involved in service delivery process. The service experience of subscribers can be mapped objectively for
service operations improvement. In case of telecom service providers the variables in operations can be
customer care support, improving the network infrastructure, etc. The model of service experience mapping
implies that service operations are linked with subscribers. Subscribers as participants act or behave in
service operations that set a service operations system apart from manufacturing systems. The service
operations are divided in two parts, the one which contacts customers and the one which does not. The
customer contact part is divided into two parts – the inanimate environment and the service personnel. In
case of telecom services, when a subscriber makes or receives a call then he is said to be a part of inanimate
environment and when he goes to a service outlet to pay the bill or calls customer care center for help, he is
said to be a part of a process which involves service personnel.
Service blueprint scheme developed by Shostack (1984) is a useful tool for describing visually the concept
of service operations. It is especially appreciated that the service
blueprint highlights the customer interactions in the service
operations process.
It is evident that when people behave in a certain environment or
with certain relationships, certain experience is created. The
environment or relationships created by the system shape all the
customer-unique service experiences thus giving them common

Fig. 2.0 Service operations conceptual model characteristics with respect to a service operations system. So,
according to the service operations system (its operation processes, policies and regulations, physical
environment and others) and the observed customer behavior, we can get a description of the service
experience of customers, the comprehensive abstraction of all the instances of the customer-unique service
experience. Fortunately, we humans have the ability to model the real world. Modeling has been a useful
and widely adopted tool for analyzing and improving (even optimizing) the real situations. It is a way to
abstract something for the purpose of understanding it before improving it. Because a model omits
nonessential details, it is easier to manipulate than the real situation.
The service experience of subscribers can be portrayed as per fig. 3.0.

Retaining Brand Loyalty of subscribers after implementation of MNP in India 13

Fig: 3.0 Service Operations Improvement

In case of telecom service providers, the tool which can be used to recognize and map subscribers’ service
experience will be call completion rates. If a telecom service provider has an extensive and good network
coverage and connectivity then the call completion rates will be very high. On the other hand a poor call
completion rate indicates that the service experience of a subscriber is not pleasant as he is not satisfied with
the basic element of the telephony service, which is good connectivity.

Retaining Brand Loyalty of subscribers after implementation of MNP in India 14

Chapter 4.0 Study of MNP implementation in other countries:

According to Frost & Sullivan, a business research and consulting firm, Mobile Number Portability is
feasible in markets which have reached a 50% penetration rate. Such high penetration is more likely to
stimulate competition. Hong Kong, Australia, South Korea and Taiwan, all had already achieved or were
near to achieving 50% penetration rate during its implementation phase. The reason for doing that was
to prevent market stagnation by urging service providers to offer more and better services to remain
competitive.

(Source: Frost & Sullivan)

Above mentioned figures make it clear that except Singapore all other countries had mobile penetration
rate very near to 50% during implementation. As a matter of fact one very evident observation we can
make from above data is that during implementation phase Hong Kong’s mobile penetration was 48.1%
and in year 2005 it went up to118.5% which is substantially higher than that of during implementation
phase.
Hong Kong’s MNP implementation can be considered successful as it managed to spur an extremely
competitive mobile market, while MNP hardly made any impact in markets such as Singapore and
Taiwan. However, contrary to service providers’ fears, the disruptions caused by MNP were either
temporary, or not as bad as initially perceived.
Even though customers are free to switch service providers and retain the same mobile number, there are
still many other barriers to customer churn.

Retaining Brand Loyalty of subscribers after implementation of MNP in India 15

4.1 Issues in implementation of Mobile Number Portability:

Long-term Service Contracts

In some developed markets such as Singapore and Taiwan, service providers often tie down their
subscribers in long-term service contracts that range from 12 to 24 months. In return, service providers
will subsidize or provide free mobile handsets. Mobile phone subscribers must wait until their contract
expires, or pay a penalty for breaking their contract if they insist to switch. In India, the subscribers who
have opted for lifetime incoming calls validity option or two to three years of incoming validity option
fall under this bracket.

Customer Satisfaction

In certain highly penetrated markets, where the fear of increased customer churn is initially perceived to
be high, service providers are still able to retain their customer base due to the already competitive
pricing, along with the excellent service offerings. There is no compelling reason for customers to
change service providers since there is no difference in terms of the services provided.

Existing Prepaid Churn

Consumers likely to change their service providers are those opting for the best promotions and the
lowest pricing of the latest services on offer in the market. This is a major characteristic of prepaid users
whose loyalty is very low. Since they have already contributed to the bulk of churn subscribers as
compared to postpaid users, MNP is expected to marginally increase churn rate from this subscriber
segment.

Pseudo Mobile Portability Implementation

Retaining Brand Loyalty of subscribers after implementation of MNP in India 16

Singapore’s call forwarding service has had very little impact since its introduction in April 1997, when
there were only two mobile service providers, Singapore Telecommunications Ltd. (SingTel) and
MobileOne Ltd. (M1) operating in the market. There were many technical difficulties regarding Singapore’s
MNP implementation. The chief complaint was that subscribers had to maintain two mobile numbers, as the
new service provider had to issue a new mobile number, which was to be used in conjunction with the old
mobile number. To avoid confusion, subscribers who had ported had to inform their contacts of their new
number as only the caller’s new number, instead of the old number would be displayed on the receiver’s
handset. Short message service (SMS) portability was available only from 2003.

Number Porting Cost and Waiting Time

Service providers will often want to charge an administrative fee and recurring monthly fees for number
porting services. These fees could discourage some potential porters, as they do not see the justification for
such service charges. Often, there is also a waiting period for mobile subscribers to get their number
successfully ported. This waiting period, which could be from one to two working days in Hong Kong,
could even extend to four to seven working days in Taiwan and Singapore, resulting in too much trouble for
some subscribers.

4.2 Challenges MNP will present to incumbent network service providers:

Loss of Branding:

Some mobile service providers are better identified in some circles by the number prefix they provide. For
example, 98240 is the number prefix used by idea, 9898 is prefix used by Airtel and 9342 is prefix used by
Reliance. When a person in Ahmedabad receives a call from say 9898510400 he can identify the service
provider of the caller by that number prefix. Idea, in one of its television advertisements highlights it
number prefix of 98240 and its jingle also has the number prefix in it. When Mobile Number Portability will
be implemented these service providers will lose one of their branding platforms. And with loss of the
number prefix identifier; mobile subscribers will not be able to recognize which service providers they are
calling or receiving calls from.

Back-end Services:
Retaining Brand Loyalty of subscribers after implementation of MNP in India 17
Mobile subscription numbers have been allocated in blocks by regulators to service providers. Block
number assignments enable easier management of individual mobile numbers and their relevant subscription
services. With MNP, back-end services will become complicated, and this will incur more cost for service
providers. In order to implement MNP or porting, service providers have to invest in more back-end
services to allow such capabilities.

Increased Competition:

The need to retain a regular number and the risk of losing that number when changing service providers has
always been a barrier for customers when opting to change their service provider. With the emergence of
MNP, this barrier is lowered, and service providers have to deal with a potential higher increase in
subscriber churn, leading to further price-based competition among service providers.

Higher Cost Structure:

With many attractive choices available in the market and the freedom to change service providers, mobile
subscribers can afford to be more demanding. Therefore, service providers have to invest more in customer
retention programs. This implies more investments for service providers in advertising and loyalty
programs.

4.3 Benefits customers will derive after implementation of MNP:

From a user’s perspective, mobile number portability creates an ability to switch mobile network without
the possible cost and inconvenience of a change of their telephone number. This is because, in the absence
of number portability, a change of number when switching networks requires most users to inform people
who contact them of the new number. In the case of business users, especially those who rely on a mobile
phone as a primary method of communication, the effort and cost involved in notifying contacts of a new
number may be quite substantial.

4.4 Strategies used by Telecom companies of other countries to retain subscribers after
MNP:
In the lead up to MNP mobile operators intensified their marketing campaigns to try to keep their customers
loyal. This continued post-implementation. Users were spoilt with new, innovative loyalty programmes and
packages, including bundling of standard services with free value-added and other services. Other
Retaining Brand Loyalty of subscribers after implementation of MNP in India 18
subscriber lock-in strategies included attractive on-net tariff structures that encourage groups of users
(usually friends and family) to stay with the same operator, or the creation of 'community-based' services
such as blogs, instant messaging, chatrooms and multi-user gaming that are only available to users on the
same network. In India, however, critical to the operators' retention strategies would primarily be
improvements to the other facets of customer satisfaction, including network coverage, quality of service
and customer service, and users will benefit from upgrades in these key areas. After implementation of
MNP in the UK, O2 one of the telecom giants took some steps and formed strategies to retain subscribers.
O2 UK's 2005 retention strategy is widely thought to be a success - in Q1 2005, O2 launched a major
advertising campaign, delivering the message 'the longer you stay with O2, the better it gets'. This
advertising strategy helped increase consumer awareness of the benefits of staying with O2. As part of this
retention strategy, O2 offered handset subsidies, specific promotions, competitions and discounted packages
to encourage customers to commit to new or longer contracts. The results were impressive: O2's churn
dropped by 12% and 21% for postpaid and prepaid subscribers respectively throughout 2005. The strategy
to offer handset subsidies might not work wonders in Indian telecom market because Indian telecom market
is already flooded with cheap and affordable handsets starting from a price range of as low as Rs. 600. In
India, Indian subscriber would prefer instant gratification and therefore asking a customer for a long time to
reap the loyalty benefits might not work. Another case of strategy implementation is by Japanese telecom
operator DoCoMo. In Japan operators released various discount packages to sustain subscriber loyalty;
typical is DoCoMo’s family discount (group discount applied for family members), together with additional
discount for one-year commitment (total of up to 50 percent discount, together with free-e-mail between
same operators). KDDI released ‘My Plan’ discount, 2-year commitment discount equivalent to
combination of family discount and 1-year-commitment (total up to 50 percent discount, with free-e-mail
for family members). Both served to keep the subscribers within their own networks. With such discounts,
operators have been successful in achieving lower churn rate. DoCoMo, KDDI, and Softbank; accelerated
the price battle, revising their price plans, however, because of the competitive price plan and subscriber
loyalty, consumers were unfazed by the price war since they had already subscribed to discount packages of
their respective operator. MNP applicants at the initial stage remained 0.2 million, only 0.2 percent of the
total subscribers. This number is much lower than the mobile industry expectations. Such ‘family-discount’
plans can work for Indian subscribers since women like to chat over phone for a very long time, and if any
such family-plan provides benefit of reduced call rates or any other service benefit then certainly it will
provide a reason for a customer to stay hooked on to his/her existing service provider.

Retaining Brand Loyalty of subscribers after implementation of MNP in India 19

4.5 Centralized Number Databases, how they’ll work?

All implementations of mobile number portability involve the use of databases that contain information on
the network with which ported numbers are associated. This information is used in routing a call to a ported
number, to determine the correct terminating network for the call. The actual information is usually a
routing number that can be used to enable a call to a ported number to be routed to the correct mobile
terminating network. Number databases are typically managed in either a centralized or a distributed
manner. The centralized model involves a single reference database containing data for all mobile numbers
(or for all ported numbers – it may not be considered necessary to store data for numbers that have not
ported). It is usual for this reference data to be copied to operational databases in each participating network
on a frequent basis. A centralized number database for mobile number portability
is generally managed by a consortium of network operators, which may comprise just the mobile network
operators or all network operators which may be involved in routing of calls to mobile numbers. The actual
operation and maintenance of a centralized number database may be out-sourced to a third party company
which has experience in database operations.

4.6 Entities who will handle number porting requests

In India, mostly the mobile subscribers deal with retail outlets in establishing their mobile service, which
includes first time activation, validity recharge, and talk time recharge. Therefore it may seem natural to
them and it might be convenient for them to approach retail outlets for porting their mobile number to a
different operator. But here one problem can be that retailers might find it difficult to work with new and
unfamiliar procedures of number porting. Also, if companies want retailers to engage in such procedure then
companies need to give some incentives to the retailers. According to a research done in 12 countries where
Mobile Number Portability (MNP) is already implemented, respondents of 10 countries asserted that it will
be convenient for them if they can get their mobile number ported through a retailer.

Retaining Brand Loyalty of subscribers after implementation of MNP in India 20

 Table 1.0 Entities from which mobile number can be ported

We can see from table 1.0 that all but one county’s respondents are of the view that retailers should be
involved in number porting services for sake of customers’ convenience.

4.7 Time to port number:

In India the DoT has proposed that it shall not take more than two days to port the number. Let’s put this
into perspective and analyze. If porting time is too long, i.e. it involves days and weeks to port than
customers might be put off and won’t opt for porting the number. Also, a lengthy porting period might
create extra costs for users in porting, or discourage them from porting. On the other hand if porting time is
reduced significantly, as in the case of India, than it allows insufficient time for proper checks at all stages.
Proper checks are to be done to avoid frauds and ensure proper completion of porting. A quicker porting

Retaining Brand Loyalty of subscribers after implementation of MNP in India 21

process may also increase the cost of porting for customer. Research done on ‘ideal-time-to-port’ shows
following results:

Table 2.0 Target

Maximum
Porting Period

We can see that unlike

in India, majority
countries have
porting period of
more than 2 days. That
is except Belgium and Ireland, all other countries have porting period which is of more than tow days. This
is because some of these countries follow what is called ‘Bulk-Porting’. This is a way by which porting of
large quantity of mobile number is done. There may be procedural advantages in managing the porting of
large quantities of mobile numbers — for example, a “fleet” of corporate mobile telephones — via a
separate procedure to that suited to porting of individual numbers. There may also be financial advantages
in managing bulk ports via a special procedure as it may allow the cost of porting many numbers to be
reduced significantly.

4.8 Economic Arrangements for Number Porting Procedure:

There are several categories of costs associated with implementing mobile number portability:
• The administrative cost each time that a number is ported;
• The establishment and operating costs associated with running a database containing details of
ported numbers, whether that database is a centralized or a distributed one;
• The costs of additional conveyance of calls to ported numbers in the case that they must transit the
mobile network originally associated with a ported number; and
• The costs of database dips in the case that this is required to determine the correct network to which
a call must be routed.

Retaining Brand Loyalty of subscribers after implementation of MNP in India 22

The most critical question a regulator faces is how to apportion the total cost of implementation. The
practical choices available to regulators are:
• Imposing it entirely on the donor provider
• Imposing it entirely on the recipient provider
• Sharing it among relevant market players
• Allowing relevant market players to negotiate how the cost should be apportioned
• Requiring all market players to bear their own cost
• Imposing it on users.

Retaining Brand Loyalty of subscribers after implementation of MNP in India 23

Chapter 5.0 Summary Findings

5.1 Summary Findings for GSM Operators 1:

• Share of prepaid subscribers in total subscriber base is 80.54% at the end of Mar-06, as compared to
78.32% at the end of Dec 2005.
• Postpaid growth rate continue to decline in this quarter as well (from 7% to 4.43%).
• Growth rate of prepaid segment increased from 18% to 22% during the quarter.
• All India ARPU for the quarter ending March 2006 is Rs. 366 showing an increase of 1.2% from
Rs.362 (Dec-05).
• ARPU of BSNL/MTNL increased by 10.5%, from Rs. 354 to Rs. 391.
• All India postpaid ARPU at Rs. 628 per month is about 2.1 times that of all India prepaid ARPU of
Rs. 298 per month.
• Average Minutes of Use (MOU) per subscriber per month for the quarter has increased from 393 to
395.
• On an average, a GSM subscriber makes 163 minutes of outgoing calls, sends 46 SMS and receives
incoming calls for 232 minutes in a month.
• While MOU per Subscriber per month has increased from 155 to 163 incoming MOU has declined
from 237 to 232.
• The ratio of incoming – outgoing traffic has shown a shift towards outgoing, from 61:39 to 59:41.
• Overall proportion of roaming revenue to the total revenue for GSM service providers is 14% as
against 15% in the previous quarter.
• The all India blended RPM (Revenue per Minute) for the quarter has marginally increased from Rs.
0.92 in Dec-05 to Rs. 0.93 in Mar-06.
• Proportion of the total outgoing GSM traffic terminating in Mobile network (CDMA + GSM) has
increased from 80% in Dec-05 to 82% in Mar-06.
• Mobile-to-Mobile Local (Intra-circle) traffic accounts for 84% of the Local (Intra-circle) traffic.
• On an average 48% of the total Intra-circle traffic terminates on network (Mobile).

1
Source: TRAI

Retaining Brand Loyalty of subscribers after implementation of MNP in India 24

5.2 Summary Findings for CDMA Operators 2:

• Share of prepaid subscribers in total subscriber base is 79% at the end of March 2006, as compared
to 82% at the end of December 2005.
• All India ARPU for the quarter ending March 2006 is Rs. 256 i.e. same as in the quarter ending
(December 2005).
• All India postpaid ARPU, which is at Rs. 547 per month is about 2.9 times that of all India prepaid
ARPU of Rs. 184 per month.
• Average MOU per subscriber per month for the quarter is 550, showing an increase of 19% from
462 per month during the quarter ending Dec-2005.
• The ratio of incoming – outgoing traffic is reversed and is 48:52 in the quarter ending March 2006 as
against 56:44 in December quarter.
• The All India blended RPM (Revenue per Minute) is estimated to be Rs.0.47 in March 2006 as
against Rs.0.55 in the previous quarter implying a reduction of 14.5%.
• Mobile-to-Mobile Local (Intra-circle) traffic accounts for 81% of the Local (Intracircle) traffic

5.3 Analysis based on summary findings:

Based on the above mentioned summary findings we can observe that the call charges have been very
low in India. We can also observe that since ARPU generated by postpaid subscribers is very high as
compared to the prepaid subscribers (for both GSM and CDMA players), but postpaid customers
constitute a minor portion of the overall subscriber base. Telecom Companies must choose between
service differentiation and cost leadership. A differentiation strategy carries benefits such as increased
ARPUs, and lower churns, while a cost leadership strategy carries the opposite. Differentiation by
unique unmatched services requires investments on innovative ideas, but currently money seems to be
flowing to advertising agencies, brand ambassadors and T.V. stations. This fact can be backed by having
a look at the annual report of the leading telecom operator Airtel who spends about Rs. 4024.68 million
on advertising and marketing alone, another telecom operator idea cellular spent Rs. 2006.20 million
year 2006. The current situation in Indian telecom market is very much similar to the Finnish telecom
market when MNP was implemented in Finland. The situation is both the cases are like price wars, the
reason for that is that differentiation between operators’ offerings is minimal. All the service providers
have a good coverage and mobile data services are no more a source of differentiation. This can be
backed by primary data collected by market research. Around 83% of respondents were stated that the

Retaining Brand Loyalty of subscribers after implementation of MNP in India 25

2
Source: TRAI
network coverage of BSNL was good, 70% of reliance subscribers were satisfied with network
coverage, 77.7% for Airtel, and 58% for Vodafone. In Finland, under same circumstances, when MNP
was implemented, the operators tried to win customers from each other by organizing heavy marketing
campaigns and offering non-mobile related giveaways and free airtime. According to the primary market
research conducted where data was collected from 246 respondents, 107 respondents expressed their
willingness to change their service provider after implementation of MNP. This leads to a projected
churn rate of 43.49%.

Retaining Brand Loyalty of subscribers after implementation of MNP in India 26

Chapter: 6.0 Conclusion and Recommendation

6.1 Conclusions:
From the facts and observations aforementioned in the report we can infer the following:

• India has low mobile penetration. Globally MNP has been implemented by countries with
penetration level of 50% or above. India has not yet reached 50% mobile penetration.
• Implementation of MNP will certainly lead to an increase in competition among telecom operators
and subscribers will benefit from the loyalty retention strategies offered in form of price reduction or
better and innovative services offered by the operators.
• MNP will increase the churn rate of the mobile service operators.
• Apart from increased competition, telecom companies will also face difficulties in branding as the
unique prefix number will no longer be a unique identity to differentiate a service provider.
• Since, Indian subscribers are more loyal to the price (affordability) then the brand or services
provided, a reduction in prices will only lead to price wars and telecom companies will be severely
affected.

6.2 Recommendations:
Based on the study of aforementioned factors and situations following strategies are recommended to
retain the brand loyalty of subscribers after implementation of MNP in India.

• Indian telecom companies should go for market development strategy by penetrating in rural
areas or areas with low penetration. Rural area presents huge opportunity for telecom companies
as the penetration level there is very low.
• From spending huge sums on advertisements and celebrity endorsements, telecom companies
should shift their focus to investing more on network infrastructure. And, improve basic service
of network coverage and connectivity. And after a certain point customers, they do word-of-
mouth publicity of such better services.
• In India mobile phones, even today, by a large proportion of subscribers is perceived as a means
of communication rather then entertainment, so enhancing value added services will not be a
long-term sustainable strategy for telecom companies. Although the market for mobile gaming is
growing very fast, such stream of revenues will not be able to compensate for the marketing
Retaining Brand Loyalty of subscribers after implementation of MNP in India 27
 expenses incurred by company. Apart from that most of the value added services like cricket
updates, horoscope etc are priced very high.
• Loyalty programmes should be designed in such a way that a subscriber does not have a very
long waiting time till he gets the loyalty benefit. It can be aimed at providing benefits to family,
by offering ‘family-plans’, ‘friends-plans’ etc.
• Telecom operators should focus on marketing efforts on their respective pre-paid and post-paid
brands to mitigate the effect of prefix identifiers, as well as build overall brand awareness
• Since, initially after implementation of MNP almost all the telecom operators will feel an initial
shock in terms of revenue due to increased churn rate; telecom companies should try to focus
more on the other streams of revenue like internet broadband services etc. Such stream of
revenue can help telecom companies to absorb the initial shocks of increased churn rates.
• Unbundling of the internet and telecom services, i.e. providing broadband internet services
which are independent of the mobile service providing business is one strategy which some of
the telecom service providers have already implemented. Such strategy, if seriously pursued by
other telecom operators then an independent source of revenue can be generated which can help
absorb the initial shocks occurring because of increase in churn rate due to MNP. Idea cellular
has come out with ‘Net-Setter’ and TATA Indicom’s ‘Plug-2-Surf’ are some of the internet data
card serviced offered. Apart from that Reliance telecom also provides such internet data card.

Retaining Brand Loyalty of subscribers after implementation of MNP in India 28

References:
Mobile Number Portability Task Force, “Service Description Mobile Number Portability”, July 2001
http://www.bipt.be/telecoms/number/npm1v1f.pdf
Mobile Number Portability Task Force, “Network Architecture and Signalling”, 17 July 2001
http://www.bipt.be/telecoms/number/npm2v1f.pdf
Mobile Number Portability Task Force, “Economic Aspects”, 29 January 2002
http://www.bipt.be/telecoms/number/npm4v1f.pdf
“Operator Portability – Specifications”
http://www.icp.pt/streaming/corpof2806.pdf?categoryid=35028&contentid=18583&field=attached_file
Oftel, “Number Portability Functional Specification”, December 2002
http://www.oftel.gov.uk/ind_info/numbering/npfs.htm
http://www.rediff.com/money/2006/dec/05mobile.htm

www.techtree.com

www.tech2.com

www.timesofindia.com/archives

http://www.researchandmarkets.com/reports/312540/

Telephone Regulatory Authority of India, Information not to press (Press Release No. 96/2007)
www.wildblueskies.com [Article on MNP implementation in India by Q4 2008].
Sean Lyons, Economic and social research institute, Dublin and department of economics, Trinity College
Dublin, 17th January 2006, “Measuring the benefits of mobile number portability”.
Stefan Buehler and Justus Haucap, Socioeconomic institute, University of Zurich, March 2003.

Retaining Brand Loyalty of subscribers after implementation of MNP in India 29