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New era of cellular competition

Mobile number portability will arrive in SA as soon as July, starting a new era of competition in the cellular industry.
By Mark Taylor, MD of Nashua Mobile.
Johannesburg, 17 Feb 2006

The introduction of mobile number portability (MNP) during the second half of this year promises to benefit the country`s millions of cellular subscribers by increasing competition and forcing mobile operators to sharpen their focus on customer service.

The market has been ready for MNP for some time: it`s an important step forward for SA`s cellular industry, and brings us in line with the best practices of most advanced cellular markets. Indeed, along with India and Japan, SA is one of the last countries with a reasonably high cellular telephone density to introduce MNP.

The idea of MNP is that a subscriber may switch operators or service providers and hold onto his or her existing cellular number. Think of it as getting a divorce and keeping the wedding ring. The benefits of MNP are significant and applicable to nearly any cellular subscriber.

Many people remain with their operator and service provider because it`s just too expensive and inconvenient to change providers because this means getting assigned a new cellular telephone number. Changing a cellphone number usually means changing contact information on Web sites, stationery, e-mail templates and anywhere else it`s printed or displayed.

You also need to inform people of your new number, which can be time-consuming and expensive. And it`s all too easy to forget to tell someone important about a change in your contact details.

The benefits of number portability stretch beyond business and are about convenience. People tend to call people rather than places as is the case with fixed-lines. Whether it`s colleagues, friends or family, having a single number makes it easier to stay in touch.

As such, the telephone number represents a significant lock that mobile operators have on their subscribers. By making that number the subscriber`s property and destroying that particular hold networks have over customers, the communications authority, ICASA, hopes to promote competition in the cellular market.

Churning and burning

The telephone number represents a significant lock that mobile operators have on their subscribers.

Mark Taylor, MD of Nashua Mobile

As MNP takes wings in the second half of the year, we can expect to see operators put together attractive deals that are geared towards winning over new customers, as well as ensuring they retain their most valuable customers.

Apart from the usual subsidies on the latest cellphones (assuming that ICASA doesn`t decide to prohibit cellphone subsidies in the meantime), operators will use every tool at their disposal to win and retain subscribers: gift vouchers, preferential tariff packages, giveaways of appliances and electronics, and so on.

Contract subscribers may follow a `grab and go` trend, churning to get the best phones, while prepaid users will most likely follow the lowest tariffs. But contract subscribers will remain liable for contract cancellation fees and penalties, so they will most likely look to change networks only when their contracts run out.

My hope is that operators and service providers will focus on value-add and service, in addition to tariffs and incentives, as strategies for customer acquisition and retention. However, it seems unlikely that any of the networks will start a price war.

The impact MNP will have on churn among South African operators is difficult to predict. In some countries - notably Hong Kong - the introduction of MNP sparked a vicious price war and caused churn rates to rise sharply for a while before returning to normal. In others, such as the US, consumers gave MNP a lukewarm reception.

Although churn actually hasn`t increased significantly in most countries following its introduction, MNP has boosted competition and given subscribers the option of leaving an operator that provides a poor service.

Challenges ahead

Indeed, international experience shows a great deal of variance in churn between operators within countries where MNP is in effect. Some operators have seen churn rise following the introduction of MNP since subscribers churn when they have good reason to and stay loyal when they don`t. Subscribers change networks if they are unhappy with an operator`s customer care, service portfolio or unattractive tariff rates.

MNP in SA will be bolstered by the fact that ICASA and the industry have gone out of their way to ensure the process is easy, quick and free to the subscriber. In some countries where MNP is in effect, consumers don`t bother to try and keep their numbers because it takes too long to port between operators, costs too much or because the process involves too much painful paperwork.

For operators and service providers, the challenges that lie ahead are to build strong brands, customer relationships and service. What the advent of MNP in SA really signals for operators and service providers, is that the market is reaching maturity. Their emphasis must shift from a wild land grab for new subscribers towards careful cultivation of a loyal customer base through sustainable growth and good customer service.

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