Wireless number portability - musical chairs with a twist, says Analysys

WASHINGTON D.C., November 21, 2003 - The impending introduction of number

portability will increase churn as consumers seek to take their business,

along with their phone numbers, in search of a better deal. However, the

result will not be as uniformly gloomy as many in the industry have

predicted, according to Analysys, the global advisers on telecoms, IT and

media (www.analysys.com).

"Many commentators seem to view the resulting churn as a zero sum game -

consumers will switch between operators in equal numbers and all operators

will be worse off as a result of subsidizing these switches," said Michael

Kende, principal consultant based in Analysys' Washington D.C. office. "The

reality could be more like a game of musical chairs with a twist - all

subscribers will be able to get up and switch operators, but when they sit

down again, some of the operators' chairs may be empty."

According to Kende there is already significant churn in the industry, as

consumers switch operators in search of better service and/or prices.

However, the valuable customers who spend the most are the least likely to

switch operators for the simple reason that they cannot afford to change

their phone numbers.

"These are likely to be customers who use their phones for business, and the

cost of switching phone numbers, along with the risk of missing important

calls, makes switching operators a last resort for many such customers,"

added Kende. "Number portability will remove the constraints from these

customers, and well-placed operators will benefit by attracting these

customers and thereby increase their average revenue per user."

Analysys believes that number portability will also allow operators to sell

new services to customers, in particular mobile data services, which are at

an early stage of adoption. Users must have handsets that can access these

services, and today the cheapest way to get such a handset is to switch

operators to take advantage of the handset subsidy offered to new

subscribers. However, for many who might be willing to try these new

services if the price is right, the cost of switching phone number outweighs

the saving realized in acquiring the new handset. Again, this could all

change under number portability.

"Operators with the most compelling offerings, in terms of prices and mobile

data services, will have a great opportunity with the onset of number

portability to not only expand the size of their customer base, by luring

customers from other operators, but also to increase the revenue that they

receive from their customers, by attracting the most valuable ones," added

Kende. "These operators must also protect their flanks by introducing

loyalty schemes - similar to a frequent flier programs - that allow them to

identify and reward their most valuable customers and ensure that new

customers do not continue the game of musical chairs."

An extended thought piece on the issue of number portability can be accessed

at:

http://www.analysys.com/Articles/StandardArticle.asp?iLeftarticle=1432&iRigh

tArticle=

Analysys works at the forefront of the communications revolution, delivering

advice and insight to clients in the public and private sectors. Analysys

staff (130 worldwide) provide strategy and systems consultancy and

information services to the companies that are creating the networked

economy, and regulatory and policy advice to governments on all six

continents.

Media contacts:

Michael Kende

Analysys - Washington DC

Tel: +1 202 349 1111

Email: michael.kende@analysys.com

Louise Nunn

Analysys

Tel: +44 1223 460600

E-mail: louise.nunn@analysys.com