Telecoms

Numbers up?

China Mobile most at threat from new policy

Will she switch?

An adage has it that if one billion Chinese were to jump at once, the world would spin off its axis. While this has no scientific basis – a different kind of jump by nearly a billion Chinese could soon cause chaos for the country’s telecoms firms.
That’s because years after the practice became commonplace elsewhere, the world’s biggest mobile phone market is taking the first steps towards number portability. In a nation of 830 million mobile phone subscribers, that could presage massive switching between operators in search of better deals. Good for consumers, of course. But  less so for the telecoms firms facing a more liberated customer base as a result – a fact that won’t be lost on shareholders.
Portability – implemented first in Singapore in 1997 and later widely copied elsewhere – is a practice that makes it easier for mobile phone users to switch between operators.
That’s because it gives ownership of the telephone number to the consumer rather than the operator. Since changing numbers is a majorinconvenience, a lack of portability makes subscribers reluctant to defect to a rival operator.  But if users can take their existing telephone numbers with them, their mobile phone contracts become a lot more  ‘mobile’ too.
According to a front page story in Tuesday’s China Daily, two regions will pilot the new portability schemes, a move that the newspaper says “will boost competition”. The two regions are the island of Hainan and the municipality of Tianjin.
“The service switch is free of charge and operators are required to support the client’s request and complete the procedure within two working days,” the China Daily points out. The schemes became operational on Monday and are seen as a first step towards nationwide number portability – a potentially game-changing scenario for the sector.
Some analysts expect a period of price war, as operators compete to woo new business. They warn too that China Mobile has most to lose,  with 575 million subscribers and the dominant market share. By comparison, China Unicom (172 million users) and China Telecom (83 million) may see the reforms more positively, as a chance to catch up on their larger rival.
HSBC’s recent telecoms report warned specifically that China Mobile faces “the threat of number portability churn”. Certainly, China Unicom is talking up the opportunity, releasing a statement earlier this week in which it promised to exploit its 3G network and iPhone tie-up (currently offered exclusively to Unicom) to pull in a “large number of users from other operators”.
The Wall Street Journal agrees: “So far, many Chinese users have chosen not to use China Unicom’s service, in part because they didn’t want to change their phone numbers. Enabling users to keep their numbers when switching carriers would make the transfer more tempting.” That means that China Mobile shareholders will be paying close attention to how the pilot programme develops, especially the customer churn rates reported from Hainan and Tianjin. If they prove high, the indication would be that Unicom (and China Telecom) will be able to chip away at China Mobile’s lead on a wider scale when portability is introduced nationally.
The timing of the pilot schemes in the telecoms sector also illustrates  some of the countervailing tensions at the heart of the policymaking cycle. Number portability is designed primarily as a market-opening measure – in terms of increasing consumer choice, lowering prices and improving underlying industry efficiency.
As such, it stands out as a counterbalance to WiC’s coverage of another recent policy debate – on the introduction of price controls on food (see Talking Point). Caps on food prices may recall the era of the planned economy. But the telecom reforms point to  a more welcome trend: reformers are still – often successfully – pushing a free market agenda that espouses the benefits of competition.  n

An adage has it that if one billion Chinese were to jump at once, the world would spin off its axis. While this has no scientific basis – a different kind of jump by nearly a billion Chinese could soon cause chaos for the country’s telecoms firms.

That’s because years after the practice became commonplace elsewhere, the world’s biggest mobile phone market is taking the first steps towards number portability. In a nation of 830 million mobile phone subscribers, that could presage massive switching between operators in search of better deals. Good for consumers, of course. But less so for the telecoms firms facing a more liberated customer base as a result – a fact that won’t be lost on shareholders.

Portability – implemented first in Singapore in 1997 and later widely copied elsewhere – is a practice that makes it easier for mobile phone users to switch between operators.

That’s because it gives ownership of the telephone number to the consumer rather than the operator. Since changing numbers is a majorinconvenience, a lack of portability makes subscribers reluctant to defect to a rival operator. But if users can take their existing telephone numbers with them, their mobile phone contracts become a lot more ‘mobile’ too.

According to a front page story in Tuesday’s China Daily, two regions will pilot the new portability schemes, a move that the newspaper says “will boost competition”. The two regions are the island of Hainan and the municipality of Tianjin.

“The service switch is free of charge and operators are required to support the client’s request and complete the procedure within two working days,” the China Daily points out. The schemes became operational on Monday and are seen as a first step towards nationwide number portability – a potentially game-changing scenario for the sector.

Some analysts expect a period of price war, as operators compete to woo new business. They warn too that China Mobile has most to lose, with 575 million subscribers and the dominant market share. By comparison, China Unicom (172 million users) and China Telecom (83 million) may see the reforms more positively, as a chance to catch up on their larger rival.

HSBC’s recent telecoms report warned specifically that China Mobile faces “the threat of number portability churn”. Certainly, China Unicom is talking up the opportunity, releasing a statement earlier this week in which it promised to exploit its 3G network and iPhone tie-up (currently offered exclusively to Unicom) to pull in a “large number of users from other operators”.

The Wall Street Journal agrees: “So far, many Chinese users have chosen not to use China Unicom’s service, in part because they didn’t want to change their phone numbers. Enabling users to keep their numbers when switching carriers would make the transfer more tempting.” That means that China Mobile shareholders will be paying close attention to how the pilot programme develops, especially the customer churn rates reported from Hainan and Tianjin. If they prove high, the indication would be that Unicom (and China Telecom) will be able to chip away at China Mobile’s lead on a wider scale when portability is introduced nationally.

The timing of the pilot schemes in the telecoms sector also illustrates some of the countervailing tensions at the heart of the policymaking cycle. Number portability is designed primarily as a market-opening measure – in terms of increasing consumer choice, lowering prices and improving underlying industry efficiency.

As such, it stands out as a counterbalance to WiC’s coverage of another recent policy debate – on the introduction of price controls on food (see Talking Point). Caps on food prices may recall the era of the planned economy. But the telecom reforms point to a more welcome trend: reformers are still – often successfully – pushing a free market agenda that espouses the benefits of competition.


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