Thursday, January 20, 2011

Mobile Number Portability - Impact on Marketing

As PM Manmohan Singh flags off nation wide roll out of Mobile Number Portability in India, there are two set of hypotheses that emerge.
1) The rich get richer and poor get poorer 
2) Equal division (of subscribers)
It has been speculated by many that those operators who came in early like Airtel and acquired the top end of the pyramid will loose out due to MNP, since the barrier of change in number no longer exists and those operating at the lower end of the pyramid like TATA and Reliance will benefit due to cheaper call rates. It seems quite logical, but there are another set of analysts that say strong players will get stronger. This is based on test results. Assuming that there will be a high degree of churn, who will benefit ?
In my opinion, the operator's brand equity is no longer an issue. Telecom services have reached a commodity stage in India. So for differentiating their services operators should ideally increase their marketing spend. But I don't think so. Operators will eventually have to cut Marketing budgets, which means no Zoo Zoo campaigns, no Docomos and even no SRK, Rahman campaigns. Here is why.
In the long run, its the operator with better network that will win. For instance there have been quite a few connectivity issues with Airtel network in Lucknow. If Vodafone provides me with better coverage, reduced call drops, I'll switch. And if this happens i.e. if both the above propositions are rejected better quality operators will benefit. In an environment of reducing ARPUs, and increasing customer churn (thanks to MNP), operators will have to divert budgets to handling the network i.e. increase their capex and opex and thus cut marketing expenses. Influence of quality on churn will also be amplified due to high penetration. A higher penetration means that if my network is faulty, the negative word of mouth and reduced switching costs will mean more churn. In the long run this will lead to a reduced tolerance of customers to poor quality.
A proof of this happening comes from this Airtel message I got today.
"Airtel always provides superior customer services to you,through 24X7 anytime,anywhere service. Thanks for being on India's network!"