MNP - added value or price war?

The introduction of mobile number portability (MNP) is undoubtedly going to change the face of mobile telephony, but whether value-added products will extinguish a potential price war is anyone's guess.

In a domain that was previously controlled by the carriers, the mobile telecommunications industry is likely to see a changing of the guard with the customer becoming king. According to Tim Scott, public affairs manager at Telstra OnAir, the changeover removes one of the last barriers to user choice.

Before the introduction of MNP carriers largely relied on the fact that mobile users were virtually locked in to their network due to the inability to port their numbers to another carrier. According to Brett Kennedy, regional director Oracle CRM applications, Australia and NZ, this 'default' retention strategy won't float in the new mobile environment.

"Going forward, their retention strategies will have to change dramatically, and that's where CRM strategies will potentially help," he said.

Neither Scott or Kennedy believe that "hard retention" strategies such as contracts will become extinct for a while, although Kennedy predicts that contract periods will become shorter as customers become more wary about entering into long-term agreements.

Both parties also believe MNP will instead see a proliferation of "soft retention" strategies centred on the packaging of services. Scott outlined Telstra's move towards packaging fixed line, mobile and Internet services in an attempt to promote customer loyalty.

Kennedy concurred, "SMS, WAP and other services - you'll see a lot more of these services being wrapped into a value-added service for mobile users."

Kennedy also said there will be an increase in service differentiation, which will bring CRM to the fore as carriers try to understand not only the direct, but also the potential value of their customers.

Telstra is already moving in this direction, according to Scott, as it moves away from a customer acquisition model towards value management.

"MNP is really putting the spotlight on retention and loyalty programs. And that means those programs will be about us getting to know our customers better, us having a greater relationship with them, and it's a correct assumption to say it obviously requires us to focus on customer management and customer relationship building," he said.

Neither party believes that a price war will ensue, but that there will instead be a focus on value-added services, such as SMS and WAP.

Telecommunications analyst Paul Budde believes a lowering of prices is inevitable as users will ultimately be drawn to the best deal.

"The customer will become king, but the customer will have to fight for it. Operators will…use their market power to confuse the issue," he said.

"By not providing [consumers] with the best possible price but disguising it with all these sorts of packages, they are still able to get extra revenue of between 5 to10 per cent out of customers just by confusing them," he said.

Although the Australian Communications Authority and the Australian Competition and Consumer Commission will jointly monitor carriers to ensure that MNP is correctly marketed to consumers, Budde believes this is a clear indication of "how much faith we have in the competition between operators that the ACA and ACCC have to come up with those sorts of guidelines and threats."

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