Mobile number portability (MNP) is planned to be introduced in Azerbaijan in October

Mobile number portability (MNP) is planned to be introduced in Azerbaijan in October this year. The big three operators in the country, Azercell, Bakcell and Azerfon have been instructed to prepare the necessary infrastructure for the simultaneous introduction of the service.

MNP allows a mobile users to port his/her mobile number from network to network in the country. Previously in other European markets, MNP has boosted competition for subscribers among operators (See analysis in Informa’s IC) and analyst house Informa T&M believes that Azerbaijain’s mobile market will follow in the same light.

Bakcell, the second largest operator by subscriptions in Azerbaijan sees MNP as a significant opportunity to attract customers in the corporate segment and the national businesses segment. Currently, Bakcell’s revenues and profits mostly come from the consumer market and the company seeks opportunities to move into the big international corporate companies and large national businesses operating in Azerbaijan, which generally have accounts with the competitors.

The CEO of Nar Mobile (the third largest operator in Azerbaijan), Jurgen Peetz commented that the introduction of MNP in 2012 in Azerbaijan will largely contribute to the dynamics of the market and promote fairness between three major players.

Nar Mobile carried out a number of studies that showed that customers in Azerbaijan are quite loyal to their numbers and are reluctant to move to other operators even if that operator offers lower prices and better services. Nar Mobile believes that with the introduction of MNP, the company will gain even more customers due to the competitive advantage in price, service quality, and innovation.

Most of the European countries have gone through MNP process between 1997 and 2011. The Introduction of MNP has helped stimulate and strengthen price competition among the region’s operators. MNP has helped third- or fourth-placed operators by subscriptions in a variety of European markets to win the lion’s share of ported numbers in 2010, 2011 and 1H12.

Another key development for mobile number portability in Europe, was EU legislation that came into force in 2010. This legislation pushed the region’s regulators and operators to reduce the time frame for porting numbers to another network. Fair-competition bodies in some EU markets have also been instrumental in the reduction of the fees that mobile users have had to pay to port their number from operator to operator.

Turkey, Italy, Spain and France had some of the highest European figures for ported numbers in 2010, 2011 and 1Q12. France, Italy and Spain have aggressive fourth-placed operators that have taken advantage of the availability of MNP to compete with incumbents for market share through cheap offers. As a result, some European incumbent operators have seen a rise in churn.

MNP has had a great impact in Turkey, where it was introduced in November 2008, with about two million numbers ported in the first five months after the introduction of MNP. Initially, Turkey’s no. 3 operator Avea benefited most from MNP but later the no. 2 operator Vodafone has taken the initiative mostly as a result of its MNP-related promotions.

MNP helps to increase a market’s competitive intensity via a rise in both the number and variety of low-priced offers and loyalty benefits offered by mobile players, including late entrants to a market, small operators and MVNOs. Some incumbent operators have consequently seen a decrease in their market shares. For example, the combined market shares of Elisa, TeliaSonera and DNA decreased in the period 2Q03-2Q04, from 98.7 per cent to 87.9 per cent, after MNP was implemented in July 2003. The churn of the incumbent, Elisa, also increased from 2Q03 to 1Q04.

Introduction of MNP in Azerbaijan will promote competition and will lead to the introduction of low-priced tariffs as it happened in most of the European markets. Precisely, the introduction of MNP in Europe led to the four per cent reduction in mobile prices and 11 per cent reduction in fixed prices. It would also be interesting to see the subscriber’s dynamics in switching to other operator’s network. For example, in Belarus, the number of subscribers that ported their numbers in the first 4 months after the introduction of MNP in 1Q12 totalled to 2000 people, which constituted 0.019 per cent out of the country’s total subscriber base of 10.7 million. Azerbaijan being a market with the similar subscriber base of 10.5 million might follow the steps of Belarus where the MNP effect have been insignificant so far.

Additionally, MNP is considered to be more relevant and have a bigger effect in post-paid markets while Azerbaijan is predominantly a pre-paid market at 83 per cent in 2Q12.