Wednesday, September 29, 2010

Competitors Follow Warid as Price War Rages In Uganda

Graphic: New Vision
ZAIN, MTN and Uganda Telecom yesterday announced a reduction in call rates as the tariff war took a new front in Uganda, one of Africa’s fiercest telecom markets.  Last week, Warid drew first blood by dropping call rates to sh5 per second across all networks.  The move by Warid set the stage for a furious price war as the telecom firms tried to outpace each other.

On Tuesday, MTN and UTL declared lower call rates between sh4 to sh5. But Zain quickly outmaneuvered the three by announcing sh3 per second to all networks, including Zain to Zain. It now means that Zain is the cheapest operator, charging sh180 (USD0.082) per minute to all networks. The offer applies to both prepaid and postpaid customers.

Levi Nyakundi, the Zain marketing manager for usage and retention, said the drop was permanent.  “It is a 66% price drop on the most popular tariff plan - Zain Flexi - which has been sh9 on-net and sh11 off-network,” said Nyakundi.

It was expected that Zain, bought by India's Bharti Airtel, would adopt a drastic pricing model largely on heavily discounted call charges, as happened in Kenya about two months ago, where calls are as cheap as sh81 (Ksh3).

 Uganda Telecom
Uganda Telecom had also turned the barrels to the other operators, announcing a rate of sh4 for calls from UTL to UTL and sh5 for calls to other networks.  According to a statement from UTL’s chief marketing officer, Mohamadou Konkobo, UTL customers will now spend a maximum of sh240 to make a call within the network and a maximum of sh300 to call other networks.

On its part, MTN announced a “celebration promotion” at sh3 per second on the per-second billing tariff plan and sh160 for calls within the MTN Yellowmax tariff plan. Isaac Nsereko, the MTN chief marketing officer, explained that clients on the per-minute plan will pay sh320 per minute for the first 10 minutes of the day. For the rest of the day, calls will cost sh160 within the MTN network.

On the MTN per-second tariff plan, customers will pay sh6 for the first five minutes, then sh3 per second for the rest of the day within the MTN network. Calls from MTN to other networks remain at sh6 per second all day, which remains one of the highest in the market.

Warid  Telecom
Warid CEO Madhur Taneja, whose firm sparked off the price war last week, said he was pleased that other telecoms were responding to the price reduction. “Reducing call rates is the way to go and the consumers will get value for their money and I hope that every player in the market does so,” he said. Officials from the other mobile telephone companies; Orange, Smile and i-Telecom were not available for comment yesterday.
The current price war is seen as a result of growing competition in the market as well as industry regulator Uganda Communications Commission’s recent reduction of the ceiling of interconnection fees from Shs180 to Shs130 per minute where firms fail to agree bilaterally.

It has been a feverish seven days in which telecoms have spied on each other for tariff structures booked with advertising agencies and letters to the regulator, Uganda Communications Commission (UCC), with cancellation after cancellation before final tariff plans were agreed upon.

MTN boasts of about 50% of the market share. It means there are still more calls from MTN to MTN. But the telecom giant now faces stiff competition on voice that will be compounded when Bharti adapts its Asian model, where it has over 100 million subscribers.

In a letter to the UCC dated September 28, 2010, the MTN chief executive officer, Themba Khumalo, said the network had introduced the tariff to celebrate its 12 years of existence in Uganda.   “During these 12 years, we have been at the forefront of making telecommunications affordable and accessible,” Khumalo wrote.  The new MTN tariffs have been launched under the umbrella campaign labelled ‘Yarriba’.

The UCC public relations officer, Isaac Kalembe, said the development is good for the industry.  [Personally] I think we are moving in the right direction because it is the wish of UCC that the rates are reduced,” said Kalembe.

Analysts also believe this plays into the hands of the consumer who has been paying an exorbitant price compared to other regional markets, largely because of the high interconnection fees.

There has not been a response yet from Orange Uganda.  Orange is the most recent entrant to the country's mobile telecom market.

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