…Crashes network calls to N9 per minute
Ben Uzor Jr
In the coming weeks, Nigeria’s highly competitive telecommunications market will witness sweeping squeeze in call-rate prices following Airtel Nigeria’s move to crash prices of mobile phone talk-time to as low as N9 per minute from the current industry rate averaging N35 to N42 per minute across networks.
This move comes barely two weeks after new owners, Bharti, acquired a substantial percentage of Celtel’s shares and re-branded in line with its mother company. Rival firms were non-committal about what kind of response would be forthcoming but analysts say they see a huge specter of price war looming with Airtel’s unexpected move. Analysts view Airtel’s move as strategic for market share as it intends to invite new subscribers on to its network and wrestle existing ones from competing networks.
This, of course, will boost revenue in the long run as Airtel will enjoy better economies of scale through reduced cost per unit of delivering services as volume increases. “This move is in line with Bharti Airtel’s promise to Nigerians to give them affordable telecommunications services. We are indeed fulfilling that promise and we expect more Nigerians to come aboard Airtel”, a senior Airtel executive told Business Day in an interview yesterday.
Bharti Airtel, who took over mobile operations in 15 African countries in a deal that makes it the world’s fifth-biggest mobile company with 180 million customers in 18 countries, is known for its low-cost strategy which has made it India’s market leader. In India, the company’s call rate charges are as low as 1US cents as against the 20US cents charged in Nigeria currently.
The new owners, analysts say, are aiming basically to squeeze the current leadership of the market and this could force a new price war that has the potential of revolutionising GSM usage in the country.
In the past four months, innovative promotional schemes from telecom companies (telcos) have reduced prices of voice calls and internet download access by 50 percent.
The internet download price slash has forced prices down to as low as N3, 000 from N10, 000 in less than three months with MTN leading the slash race. Industry experts believe the price will in no time drop to levels comparable to UK charges which is currently about N1, 250 or 5 UK pounds sterling. Industry analysts thus strongly believe that the move by Bharti will force other operators to further review their present voice call rate in order to stay competitive.
Some analysts are however skeptical about the Airtel’s price strategy. “In my opinion, I don’t think N9 per minute will be profitable for them considering the current interconnect rate. As you know, the difference between the price of voice call and the interconnect rate is what makes them profitable. So, for instance, if the current interconnect rate is N10.12 and they intend to offer N9, then it makes no sense business wise. I believe this price reduction will be for on-net calls and not for off-net call”, one analyst who pleaded anonymity told BusinessDay.
Recently, Ernest Ndukwe, past executive vice chairman, Nigerian Communications Commission (NCC), told a gathering of Information Communication Technology (ICT) stakeholders that the Commission had laid the foundation for tariff reduction with the issuance of a new interconnect regime in December 2009. Interconnection rate represents the rate which a telecommunications operator who originates a call pays to another operator on whose network a call is terminated.
“I have continued to see tariff drop since the last exercise with respect to interconnect rates. Going forward, prices will continue to fall because we have always insisted that more competition will affect tariffs in a positive way”. It would be recalled that in August, MTN Nigeria floated a new set of value added propositions which featured product offerings that allow customers enjoy more call time at a highly reduced cost across its market segments, causing increased competition among telecom players.
For instance, customers on MTN Smartlink will enjoy retrogressive tariff plan which allows the customer to pay less for more time spent calling; voice call price could then fall to as low as 25 kobo/second from a peak 50 kobo, a whopping reduction of 50 percent.
In a swift reaction to the earlier strategic move by MTN which enticed teeming subscribers to its network with its new tariff plan (MTN Funlink, Smartlink, Prolink, Bizlink and Happilink), the fifth licensed GSM operator, Etisalat Nigeria, introduced a new tariff plan that allows subscribers enjoy lower rates of 25 kobo per second for voice calls from a peak of 50 kobo per second.
The unique selling point of the value proposition is that subscribers could make calls to anyone regardless of time, network or even location. National operator, Globacom, launched a package in Port Harcourt that enables telecoms subscribers pay 25 kobo per second for all calls to any network in the country without any rental or access fee. In addition, the package, ‘Glo Infinito’ offers free midnight calls from 12 midnight to 5a.m as well as a bonus of between 10 percent and 20 percent for every recharge with N500 and higher.
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