Mobile Number Portability, or MNP , which allows you to change the operator while retaining the cell number, might be the next big worry for Indian telecom players already hit by growing operational expenses and declining margins. As customer helplines are flooded with requests for switching over to rival operators, MNP , launched nationwide on January 20, could just trigger another tariff war, say analysts.
Bharat Sanchar Nigam Ltd, or BSNL, has already started advertising one-paisa-per-second tariff for both 2G and 3G services to avoid subscriber churn. Freebies like free talktime and free Black-Berry services might be just around the corner. "You keep the same number but start getting up to 60 per cent discounts on all your calls - that is a powerful proposition," says Rajiv Bawa, Executive Vice-president, Corporate Affairs, Uninor. Its dynamic pricing model offers customers different tariff plans at different hours, which, the company feels, will attract pre-paid users. New offers will come slowly as the Department of Telecommunications has barred operators from giving special discounts to new customers.
The tariff war, third in a row, comes barely a year and a half after Tata DOCOMO launched its famous "one paisa per second call" offer in September 2009, compelling bigger players such as Bharti Airtel and Reliance Communications, and the rest, to respond.
But this time the turf war may not be totally about tariffs. Take Shaakun Sethi, a social marketer, who pays an average monthly bill ofRs 1,500 to Vodafone. "I don't trust the new players since I have not used their services. I don't want to switch over just because they are cheaper," says Sethi. So is it more about quality this time? Ajit Joshi, CEO of Infiniti Retail, which runs Croma retail stores, plans to switch from Loop Telecom to Tata DOCOMO. "I want a better network. I am also an iPad user and it makes sense to switch to a 3G player," says Joshi, who pays an average ofRs 2,500 every month.
Analysts believe the incumbents, which already have a pan-India coverage, won't be affected by MNP much and the greenfield players will take the hit. The impact is difficult to measure but is expected to be anywhere between 50 and 100 basis points on profitability. "Earnings before interest, taxes, depreciation and amortisation, or EBITDA, will be hit in the short term because of advertising and marketing exercises," says Archit Singhal, analyst at brokerage firm Jaypee Capital. Operational expenses will go up as companies focus on better customer support.
According to Informate Mobile Intelligence, a research agency, the expected churn in pre-paid category will be 17 per cent and close to 19 per cent in postpaid. "The post-paid customer is a gold mine and operators will try to retain them," says Neeraj Jain, Director, transaction services, at KPMG. The telecom sector witnessed its first price war in 2003 when CDMA players entered the fray with lower tariffs.
As the GSM lobby also went on a similar offensive, the revenue implications were easier to absorb given the sector's nascent stage and opportunity for growth. It's not the same scenario any longer in a country with over 700 million mobile users and 14 operators now. Like 2009, another tariff war could see revenues taking a big hit.
To avoid a repeat of 2009, the sector might see a few fresh business models. Broadband wireless access and 3G could become the new revenue earners and data the new battlefield. MNP will play a big role depending on who has a bigger base of post-paid customers with high average revenue per user. The profits lie there.