High-average revenue per user (ARPU) customers value the identification merits of their unique telephone number which allows them to maintain uninterrupted communication with social and, often more importantly, business contacts. This sub-segment is typically not overly price sensitive and is unlikely to react with mass customer defections after an MNP introduction. However, in the medium-to-long term an impact on this sub-segment is likely to be much more pronounced.
A significant price disparity with peers is unlikely to remain unnoticed by such subscribers, and operators will be forced to reduce their tariffs or introduce additional loyalty programmes to counter the threat of simplified customer migrations. Voice prices are likely to come under more pressure, with negative implications for profitability.
Telephone number uniqueness is particularly sought after by corporate customers in the business-to-business (B2B) and business-to government (B2G) segments. Fitch believes that as a newly emerged super-incumbent operator in Russia, Rostelecom is well positioned to strengthen its corporate presence particularly in the B2G segment. The introduction of MNP would help this if the company can increase its national mobile coverage in line with its strategy. MNP may challenge MTS's eadership in the B2B segment where the company was reported to be holding approximately 40% market share.
In the absence of wide-spread handset subsidisation in Russia, customers are not tied by long-term contract obligation, and the churn is already high, particularly in the low-ARPU segment. So, low-ARPU customers are unlikely to take advantage of MNP opportunities and the overall impact of MNP introduction on this segment is likely to be subdued.
MNP-driven churn and its overall impact are likely to be highly sensitive to migration-related costs and to time delays, albeit less so. An exaggerated MNP price may significantly reduce the economic benefits of migrating to a new operator and dampen its price-disruptive impact.
The introduction of MNP may help voice price discounters such as Tele2 Russia and smaller mobile operators such as Rostelecom grow their mass market shares. Potential new entrants to the mobile market including MVNO and currently data-only LTE players would also be facing brighter prospects if certain technological and regulatory issues can be resolved. Potentially, Vimpelcom may be the hardest hit. According to Fitch's estimates, its mobile average price per minute was in the range of 20% higher vs. its key Russian peers in Q411.
MNP introduction has been debated in Russia for many years and most operators agree that it is technologically feasible and should not be overly expensive to implement. However, in Fitch's view, a political will was lacking more than anything else, and this element may change as Russian President Medvedev recently asked the Ministry of Communications and the Prosecutor General's Office to review this issue.
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