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Sun 25 Jan 2009 04:00 AM

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Switching networks

Mobile number portability is already in place in a handful of countries in the Middle East and Africa, with more in the region expected to launch the service next year. CommsMEA looks at some of the lessons learnt around the world, and the challenges facing operators who are about to confront MNP.

Mobile number portability is already in place in a handful of countries in the Middle East and Africa, with more in the region expected to launch the service next year. CommsMEA looks at some of the lessons learnt around the world, and the challenges facing operators who are about to confront MNP.

Bahrain and the UAE are both expected to launch mobile number portability in 2009, but in global terms, the Middle East and North Africa is relatively new to the world of MNP.

Singapore was the first country in the world to introduce a mobile number portability (MNP) system over ten years ago with a call forwarding based solution, and since 2003, all EU countries have been required to introduce MNP. In contrast, it was launched in Jordan, Saudi Arabia, Oman and South Africa in 2006, and one year later in Egypt.

MNP is widely considered to be a vital step towards facilitating competition in mature telecoms markets, and with the end of monopolistic telecoms regimes and the introduction of second and third operators in the region, porting numbers across networks is one of the next big steps in continuing the liberalisation of the sector.

Telecoms technology consultant, John Horrocks, who has advised regulators in Bahrain and South Africa and assisted Saudi Telecom and Mobily in their porting procedures says that MNP should be introduced without delay in markets with high subscriber rates.

He says: "If the size of the prospective market is sufficient to justify MNP then it should be introduced as soon as possible, because it is much more expensive to add it to existing systems than to build it in from the start, especially the customer management and IT systems. The network is a bit easier."

Cost implications

It is easy to understand why operators may only see the negative aspects of MNP, and as such be opposed to its introduction. The system will cost a not insignificant sum to implement, and it could lead to a price war and may even increase churn, and the potential losses for incumbents with an established customer base could be greatest.

The cost of porting a number varies massively from country to country, from US$4.75 per ported number in Sweden to $36.88 per ported number in the UK, according to figures from Analysys.

"In general, each provider finances its own set-up costs," says Noelle Jones of Network Strategies Limited. "There may be a one-off administration (porting) cost paid by the recipient provider to the donor provider for each customer port; these are generally required to be cost-oriented.

In some countries it is permitted for porting costs to be recovered via a porting fee charged to the customer by the recipient provider, however it is common practice for recipient providers to waive the fee and a high customer porting fee may depress porting demand," she says.

While increased costs may be difficult for an operator to avoid, one major concern for operators that they do have some degree of control over is churn. Although it seems like a plausible conclusion that MNP will increase churn, statistical evidence that this is the case is hard to find.

"There seems to be no reliable figures, and in any case the effectiveness of MNP will depend on the implementation and processes and how easy or cheap it is for the customer. The best measure of effectiveness is the percentage of the customer base that ports per year and figures for countries where MNP is thought to work well are 5%-9%. These figures assume recipient led and no winback," says Horrocks.

"The problem is that MNP is often introduced at the same time as other market changes such as the entry of new players and so the effect of MNP cannot be isolated."

Researchers at Analysys conclude that "MNP does not generally lead to long-term increases in churn or decreases in price. While suppressed demand can cause a temporary flurry of churn after the introduction of MNP, this generally settles down to its historical value. In some cases, churn actually falls following the introduction of MNP, as operators put more focus on achieving customer loyalty."

This was the case in the US, where Verizon achieved its lowest ever churn rates in each of its three quarterly reports after MNP was introduced, continuing Verizon's trend of reducing churn rates. The network adopted a strategy of investing in its network quality to improve capacity and reliability, and then followed it up with a marketing campaign highlighting the investment.

Similarly, the effect on tariffs and on average revenue per users is inconclusive as other factors extrernal to MNP can have a knock-on effect on ARPU.

Lowering price is not the only means of clinging on to customers. Other strategies can be deployed that will enhance the customer experience and ultimately should increase loyalty. Networks can offer bundled services, longer contract periods or offer incentives to migrate customers from prepaid accounts to postpaid, reducing the opportunity to churn.

"Reduced tariffs may not be the only benefit to consumers as market players look to non-price mechanisms to retain customers or capture greater market share. For example the launch of MNP in Japan in 2006 saw operators releasing new handset models, offering pay-by-installment offers for purchase of new handsets and announcing the implementation of 1xEVDO Rev A," says Jones.

Barriers to success

Not identifying the barriers to MNP can cause it to be a costly failure. In Singapore only 130,000 out of six million mobile users ported their numbers over an eleven year period. Users in Singapore may have been put off by the rudimentary porting system that was introduced (and not updated until this year), that meant customers needed to maintain two numbers.

In contrast, figures from TMG show that in South Korea over 50% of mobile subscribers have ported their number. One of the reasons given for the high usage of the service is that Korean subscribers have two weeks to decide whether they like their new service provider, otherwise they can port back to their original provider free of charge.Recipient led systems are generally thought of as the most effective. Noelle Jones explains why: "Donors have little incentive to fast-track the porting process, and a longer porting time gives greater opportunity to offer inducements for the customer to stay with the donor operator. From a customer viewpoint, dealing with just the recipient operator is far preferable than having to contact both donor and recipient in order to arrange the port."

A delay to the process of switching networks is another potential problem area that can stifle consumer interest. Whereas in South Africa it takes one day to swap networks, in Oman, users have to wait for three days. And in Saudi Arabia the time period is five days. This can be compared with Australia where porting can be achieved in only three hours. In Australia, 6.1% of mobile subscribers ported in 2007, compared to 0.5% in Oman.

Australia is considered by many to be one of the best examples of a successful implementation of MNP, with an average of 85,000 ports per month, according to figures from the industry body that administers MNP in the country.

Noelle Jones, of Australian analyst firm Network Strategies Limited, attributes it to a "transparent and seamless" system.

"What this means is that the customer enters a shop, signs up with the new provider and in most cases walks out a few minutes later with an operational service that uses their existing number," she says.

"This is achieved through a high level of industry co-operation, and a regulatory framework that is a combination of government regulation and industry self-regulation. Well-defined procedures are defined within the code which applies to all telcos, both operators and resellers, and was developed by the trade association."

The importance of a firm hand from the regulator is an issue highlighted by Horrocks, who advises regulators "maintain detailed supervision of the implementation. Otherwise a successful implementation is unlikely to be achieved," he says.

Jones adds: "It is not unusual for operators with the largest market shares to seek to delay the implementation of MNP, or to advocate solutions that may minimise porting demand - for example with long porting times or high consumer charges. Also early implementations of MNP, such as that in Singapore, did not permit full transfer of services. This problem could become more serious as applications using 3G and 4G services become more complex," she says.

"The lack of MNP is seen as a barrier to competition - customers may be less inclined to switch providers if they need to change their number. So regulators need to ensure that the MNP process does not include any potential barriers to port, and that anti-competitive behaviour (such as delaying tactics or employing winback strategies prior to porting) is not tolerated."

Jones says that regulators must also be careful not to assume that low porting levels are indicative of barriers to porting.

"Low porting levels may in fact be a result of successful retention strategies - which means the customer is still reaping the benefits of MNP in a highly competitive market," she adds.

Consumer awareness is another important factor that may need to be addressed by the regulator. In South Africa, the regulator launched a campaign to inform customers of the porting options available to them. Despite this, other factors had an impact on customer awareness. Horrocks explains: "One problem in South Africa is that the turnover of staff in shops is high and so it is not explained properly to customers, hence it is not used as much as one would expect."

Despite potential benefits for consumers, for some countries spending time and money on a MNP system might not be worthwhile, as "some countries or states may be too small for it to give a net benefit", says Horrocks.

He explains: "There are cheaper measures than can make changing number less difficult - these other alternatives have never been explored adequately, especially for small countries. An extreme example is the Channel Islands, with a total population around 150,000, where the implementation is costing over £10 per head over all the population." One such alternative to MNP is for the recipient network to foot the cost of a round of text messages alerting a customer's contacts to their new mobile number.

But whatever the cost of MNP, in terms of implementing the service, offering enhanced deals to customer or upgrading the network, operators would be wise to remember that if they do lose customers through the introduction of number portability, they will also be able to win them back through the same process. And they will already have a vital tool with which to do so: their mobile phone number.

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