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GSM Tariffs: The Winners and Losers
- By Ikem Okuhu
- Published February 7th, 2011
- BrandWorld
- Unrated
GSM Tariffs: The Winners and Losers
Telecom subscribers in Nigeria are beginning to smile as call costs have been tumbling, thanks to competition but IKEM OKUHU thinks that while subscribers have reasons to smile, operators’ fortunes are mixed bags.
Etisalat started the race downhill when it slashed call costs on its network to 25 kobo per second in September 2010. When this happened, the market was shaken. Shaken in the sense that quite a number of people had given up hope of having cheaper telephone calls in Nigeria.
Although the regulatory body, the Nigerian Communications Commission had on occasions promised to “work” with the operators to bring down call costs, it remained mere promises that even the regulators had no power to enforce. The coming of GSM operators and other initiatives that deepened the tele-density of Nigeria was premised on leaving consumer values to the vagaries of market forces. It was therefore thought that except operators have the ultimate power to decide on what to charge for calls on the networks.
Recall that when the turf had only three operators (MTN, Econet and M-tel), there was an earlier belief that calls could not fall below N50 per minute and that it was impossible to make calls on the persecond platform. But it took the entrance of indigenous operator, Glo to make this happen.
When Glo tok this initiative and was amassing subscribers, the others quickly followed. This was the first inkling that forces of demand and supply, especially that driven by the entrance of new operators would eventually drive costs down. And that is what is happening in the market at the moment. Before Etisalat led the charge towards the end of last year, the market was actually waiting for someone to bail it out as it were. Theleading operators, MTN and Glo, although, have in place, a number of value added initiatives, were actually playing mind games, doing their best to reinforce and enhance their top-of-mind-awareness rather than making moves that would brings call costs down.
By this time, talk was that a certain Indian company, Bharti Airtel was on the verge of taking over Zain. Bharti, which eventually came into the country as Airtel, had promised to bring call costs down and give subscribers opportunity for longer talk time as was previously not possible.
While the market waited for Airtel, it was Etisalat that took the initiative and announced that calls would cost as low as 25 kobo per second for calls within its network. This was followed by another initiative that put call costs on, inter-network, at the same rate.
Soon, it was Glo’s turn. Managers of this network saw that leaving calls at an average 40 kobo per second was not going to work for the brand for the long term. Although there is very strong equity attached to phone numbers, a number of Nigerians would walk down the street, buy a new SIM card and throw the old one away if they see values like lower costs available from competition.
Glo also put its costs at average 25 kobo per second as well as several other values that could drive it further down. And things kept getting better. Next in tow was Aitel, the new owners of Zain. True to its promise of delivering better and higher value for money and subscriber time, Airtel slashed its calls to as low as 20 kobo per second. But here, you will have to pay 60 kobo for the first minute of the first call each day.
While this was going on, the market was looking the way of MTN, the leading operator to join the fray. This brand that has the strongest presence and greater mind and market share was not going to “commoditise” its operations. Premium is the name of MTN’s game and there must be a premium to be paid for using a premium brand.
MTN pretended as if it was not aware of what direction the market was headed. It sustained emphasis on its leadership and spread. What it has done is to review downwards, tariffs for its Family and Friends product as well as create a “Special Number” product on which you can make endless call for free. The rest messaging was emphasising leadership and premium services.
But was this the season to drive cost leadership? Is it possible to sustain emphasis on “premium” positioning in a market where people are in search of value for money? Can telecom services be equated to fashion and automobile where purchasing decisions are driven more by status than costs?
While we are searching for the answers to these questions, the networks that have lowered their tariffs were soaring most of them at the expense of other networks. Statistics are scarce but we have been able to glean that Etisalat for instance has been the greatest beneficiary of downward tariff review. Between September 2010 and January 2011, this newest entrant into the market has grown its subscriber base from just about 5 million to well over seven million. This represents over 30 percent growth.
As at the time of filing this report, statistics from other networks were tough find. But we went to town and searched the market, especially people that have been using mobile phones over the past three years and who are still buying into new networks.
Before now, it was Zain and Etisalat (now Airtel) that was losing subscribers. But as at present, it seems this platform is toast of Nigerians who just want networks that offer them cheaper call rates. We spoke to 120 people in Lagos and while 55 of them had acquired Etisalat lines, 30 had bought new Airtel numbers. Glo, on its part, has 25 while MTN came last with 10.
The interesting thing is that the bulk of these people also have MTN lines but as one of them said, “I use my MTN to receive calls because that is what most of my business associates and friends know me with. But I use this new one to make calls because it is cheaper.”
And that is the way the market is looking. On the average, out of every 10 Nigerians you encounter, seven of them would have more than one mobile phone in his pocket. In the early days, this was status symbol for some. For others, it offered them the opportunity to reach and be reached when they move to locations not covered by any one of the networks.
But what is happening now is a clear departure from the past. Having two numbers or more no longer defines status. Rather, it speaks of cost-related issues. People generally want to pay less for phone calls and the network that offers greater value drives preferences.
Telecom subscribers in Nigeria are beginning to smile as call costs have been tumbling, thanks to competition but IKEM OKUHU thinks that while subscribers have reasons to smile, operators’ fortunes are mixed bags.
Etisalat started the race downhill when it slashed call costs on its network to 25 kobo per second in September 2010. When this happened, the market was shaken. Shaken in the sense that quite a number of people had given up hope of having cheaper telephone calls in Nigeria.
Although the regulatory body, the Nigerian Communications Commission had on occasions promised to “work” with the operators to bring down call costs, it remained mere promises that even the regulators had no power to enforce. The coming of GSM operators and other initiatives that deepened the tele-density of Nigeria was premised on leaving consumer values to the vagaries of market forces. It was therefore thought that except operators have the ultimate power to decide on what to charge for calls on the networks.
Recall that when the turf had only three operators (MTN, Econet and M-tel), there was an earlier belief that calls could not fall below N50 per minute and that it was impossible to make calls on the persecond platform. But it took the entrance of indigenous operator, Glo to make this happen.
When Glo tok this initiative and was amassing subscribers, the others quickly followed. This was the first inkling that forces of demand and supply, especially that driven by the entrance of new operators would eventually drive costs down. And that is what is happening in the market at the moment. Before Etisalat led the charge towards the end of last year, the market was actually waiting for someone to bail it out as it were. Theleading operators, MTN and Glo, although, have in place, a number of value added initiatives, were actually playing mind games, doing their best to reinforce and enhance their top-of-mind-awareness rather than making moves that would brings call costs down.
By this time, talk was that a certain Indian company, Bharti Airtel was on the verge of taking over Zain. Bharti, which eventually came into the country as Airtel, had promised to bring call costs down and give subscribers opportunity for longer talk time as was previously not possible.
While the market waited for Airtel, it was Etisalat that took the initiative and announced that calls would cost as low as 25 kobo per second for calls within its network. This was followed by another initiative that put call costs on, inter-network, at the same rate.
Soon, it was Glo’s turn. Managers of this network saw that leaving calls at an average 40 kobo per second was not going to work for the brand for the long term. Although there is very strong equity attached to phone numbers, a number of Nigerians would walk down the street, buy a new SIM card and throw the old one away if they see values like lower costs available from competition.
Glo also put its costs at average 25 kobo per second as well as several other values that could drive it further down. And things kept getting better. Next in tow was Aitel, the new owners of Zain. True to its promise of delivering better and higher value for money and subscriber time, Airtel slashed its calls to as low as 20 kobo per second. But here, you will have to pay 60 kobo for the first minute of the first call each day.
While this was going on, the market was looking the way of MTN, the leading operator to join the fray. This brand that has the strongest presence and greater mind and market share was not going to “commoditise” its operations. Premium is the name of MTN’s game and there must be a premium to be paid for using a premium brand.
MTN pretended as if it was not aware of what direction the market was headed. It sustained emphasis on its leadership and spread. What it has done is to review downwards, tariffs for its Family and Friends product as well as create a “Special Number” product on which you can make endless call for free. The rest messaging was emphasising leadership and premium services.
But was this the season to drive cost leadership? Is it possible to sustain emphasis on “premium” positioning in a market where people are in search of value for money? Can telecom services be equated to fashion and automobile where purchasing decisions are driven more by status than costs?
While we are searching for the answers to these questions, the networks that have lowered their tariffs were soaring most of them at the expense of other networks. Statistics are scarce but we have been able to glean that Etisalat for instance has been the greatest beneficiary of downward tariff review. Between September 2010 and January 2011, this newest entrant into the market has grown its subscriber base from just about 5 million to well over seven million. This represents over 30 percent growth.
As at the time of filing this report, statistics from other networks were tough find. But we went to town and searched the market, especially people that have been using mobile phones over the past three years and who are still buying into new networks.
Before now, it was Zain and Etisalat (now Airtel) that was losing subscribers. But as at present, it seems this platform is toast of Nigerians who just want networks that offer them cheaper call rates. We spoke to 120 people in Lagos and while 55 of them had acquired Etisalat lines, 30 had bought new Airtel numbers. Glo, on its part, has 25 while MTN came last with 10.
The interesting thing is that the bulk of these people also have MTN lines but as one of them said, “I use my MTN to receive calls because that is what most of my business associates and friends know me with. But I use this new one to make calls because it is cheaper.”
And that is the way the market is looking. On the average, out of every 10 Nigerians you encounter, seven of them would have more than one mobile phone in his pocket. In the early days, this was status symbol for some. For others, it offered them the opportunity to reach and be reached when they move to locations not covered by any one of the networks.
But what is happening now is a clear departure from the past. Having two numbers or more no longer defines status. Rather, it speaks of cost-related issues. People generally want to pay less for phone calls and the network that offers greater value drives preferences.
