TRIS Rating Co., Ltd. sees phone revenues pressured by Mobile Number Portability (MNP) but limited impacts on credit profiles of the three largest mobile-phone operators in the medium term. The credit rating agency also expresses concern over potential price wars enabled by MNP after the awards of the third generation (3G) mobile-phone licenses.
The mobile phone industry is expected to enter a new chapter with the implementation of the MNP in December 2010, said TRIS Rating. MNP allows subscribers to switch operators without having to change their phone numbers. TRIS Rating expects operators’ market shares to be impacted from two groups of subscriber churns: immediate and market-induced churns. The immediate churns will be from subscribers who plan to switch their operators right away after the MNP is allowed. Subscribers in this group are those who are dissatisfied with their current operators, but afraid to switch previously because they do not want to change phone numbers. Although impacts from the immediate churns are uncertain, we believe that it should be limited in scope. One reason is the proliferation of multiple-SIMs which partly reflects consumers’ willingness to enjoy multiple call packages from different operators. In the medium term, the market-induced churns is a more important factor. The market-induced churns will be from subscribers who switch because they are lured by another operator’s marketing strategies.
The MNP should force each operator’s tariffs down gradually, pressuring revenues, TRIS Rating says. Nonetheless, the role of pricing as a competing tool has diminished as the market matures. Operators are expected to sustain tariffs and revenues via improving network quality, tailored packages, bundled services, and competitive data capacity. Marketing expenses are expected to rise as operators have to put more efforts in retaining subscribers. This will impact profits, but on a manageable extent. TRIS Rating does not anticipate operators to engage in aggressive subscriber acquisitions, which will lead to higher network investments, an undesirable outcome under the build-transfer-operate (BTO) concessions.
In the longer run, TRIS Rating cautions on the MNP implications once the 3G licenses are granted. With ample regulatory cost savings, operators can then resort to aggressive price cuttings to capture market shares again. This scenario could deteriorate operators’ credit profiles.
TRIS Rating has three mobile phone operators in its portfolio, including Advanced Info Service PLC (ADVANC) with company and issue ratings at “AA/Stable”, Total Access Communication PLC (DTAC) with company and issue ratings at “AA-/Stable” and True Corporation PLC (TRUE) with company and issue ratings at “BBB/Negative”. -- End
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