Checkmating Dominance In Telecom Sector

Dominance is the power that enables one producer or seller of goods or  an operator or service provider to make decisions and to act independently of its competitors and customers in a given or specific market.

Typically, a dominant market confers undue power or advantage on the sole producer/seller or service provider to raise prices or reduce output without being concerned about the competitors and the  customers. 

In a market where one dominant supplier exists,  there is anti-competitive behaviour, with  potentially-harmful effects on customers.  

Africa‘s telecom sector is fast emerging into a dominant market. 

 A few  days ago, it was reported that MTN South Africa had slashed the price of prepaid mobile data, as well as launched a new plan that offers large data bundles at aggressive prices.

 According to TechCabal, “a 200GB bundle, for example, is available for Rand 399, working out to just Rand 2GB – or a thousand times cheaper than the standard, ad hoc rate of Rand 2/MB for data that was common in the industry 15 years ago.”

In contrast, MTN has increased the prices of its services in Ghana, while also planning to increase tariffs in Nigeria. Specifically on November 28,  MTN in  Ghana announced that it has implemented an upward review of its voice and data prices by 15% for most of its products and services for both prepaid and postpaid customers.  

Ghanaians took to social media to express their outrage describing the move “outrageous”. One X user Baffour Kyei complained that “if the cost of operation is getting higher for MTN Ghana, then they should stop buying new expensive cars for three years coming… this new cost on us is too much!”.

  On a recent trip a few months ago, the senior team of  MTN South Africa visited President Bola Tinubu and various governments. A move many social media commentators in Nigeria described as “a way to lobby for an increase in tariff”. 

Over the past decade, MTN has repatriated more than USD10 billion from Nigeria to South Africa to pay profits to its shareholders. The South African company has not stopped repatriating profits even as inflation has soared and devaluation of currency has hit hard. 

Also, even with the weakness, MTN Nigeria’s EBITDA margins remain what industry watchers have described as ‘outstanding’, this is close to 47% down from 53% last year. AT&T by contrast, which operates in ARPU of more than $50 per person compared to MTN’s few dollars, operates at circa 40% EBITDA margin! One wonders,  “what justifies their increase in pricing when they are so profitable?” lamented a Nigerian on App X (formerly Twitter).

It is obvious that MTN is bent on making ordinary Ghanaian users the sacrificial lamb and is planning to ask Nigerian citizens to enlarge the profit it makes.

One important thing to note is that their ability to seek price hikes in Nigeria and Ghana to the detriment of the users is their dominant status which is not the case in South Africa. In Nigeria, MTN enjoys close to 65% of the revenue share of the telecom industry whereas in Ghana they have close to 70% market share of subscribers. 

  In South Africa, by contrast, Vodacom has 40% market share to MTN’s close to 30%. This is what happens when dominant companies are allowed to flex their muscles.

The regulators in Ghana and Nigeria have a duty to monitor and check dominant companies because of the potential ramifications on the cost and quality of the network. Our governments in particular should take notice and ask relevant questions: How can they be slashing prices in their home market and increase prices in Nigeria: their largest market and breadbasket?

– Binuyo, a public affairs analyst writes from Ibadan