This move comes barely two weeks after new owners, Bharti,acquired a substantial percentage of Celtel’s shares and re-branded in line withits mother company.
Rival firms were non-committal about what kind ofresponse would be forthcoming but industry analysts say they see a huge specterof price war looming with Airtel’s unexpected move.
Analysts viewAirtel’s move as strategic for market share as it intends to invite newsubscribers 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 bettereconomies of scale through reduced cost per unit of delivering services asvolume increases.
“This move is in line with Bharti Airtel’s promise toNigerians to give them affordable telecommunications services. We are indeedfulfilling that promise and we expect more Nigerians to come aboard Airtel”, asenior Airtel executive told BusinessDay in an interviewyesterday.
Bharti Airtel, who took over mobile operations in 15 Africancountries in a deal that makes it the world’s fifth-biggest mobile company with180 million customers in 18 countries, is known for its low-cost strategy whichhas made it India’s market leader. In India, the company’s call rate charges isas low as 1US cents as against the 20US cents charged in Nigeriacurrently....
The new owners, analysts say, are aiming basically to squeezethe current leadership of the market and this could force a new price war thathas the potential of revolutionising GSM usage in the country.
In thepast 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 N3,000from N10,000 in less than three months with MTN leading the slash race. Industryexperts believe the price will in no time drop to levels comparable to UKcharges which is currently about N1,250 or 5 UK pounds sterling
Industryanalysts thus strongly believe that the move by Bharti will force otheroperators to further review their present voice call rate in order to staycompetitive.
Some analysts are however skeptical about the Airtel’s pricestrategy.
“In my opinion, I don’t think N9 per minute will be profitablefor them considering the current interconnect rate. As you know, the differencebetween the price of voice call and the interconnect rate is what makes themprofitable.
So, for instance, if the current interconnect rate is N10.12and they intend to offer N9, then it makes no sense business wise. I believethis price reduction will be for on-net calls and not for off-net call”, oneanalyst who pleaded anonymity told BusinessDay.
Recently, Ernest Ndukwe,past executive vice chairman, Nigerian Communications Commission (NCC), told agathering of Information Communication Technology (ICT) stakeholders that theCommission had laid the foundation for tariff reduction with the issuance of anew interconnect regime in December 2009. Interconnection rate represents therate which a telecommunications operator who originates a call pays to anotheroperator on whose network a call is terminated.
“I have continued to seetariff drop since the last exercise with respect to interconnect rates. Goingforward, prices will continue to fall because we have always insisted that morecompetition will affect tariffs in a positive way”.
It would be recalledthat in August, MTN Nigeria floated a new set of value added propositions whichfeatured product offerings that allow customers enjoy more call time at a highlyreduced cost across its market segments, causing increased competition amongtelecom players. For instance, customers on MTN Smartlink will enjoyretrogressive tariff plan which allows the customer to pay less for more timespent calling; voice call price could then fall to as low as 25 kobo/second froma peak 50 kobo, a whopping reduction of 50 percent.
In a swift reactionto the earlier strategic move by MTN which enticed teeming subscribers to itsnetwork with its new tariff plan (MTN Funlink, Smartlink, Prolink, Bizlink andHappilink), the fifth licensed GSM operator, Etisalat Nigeria, introduced a newtariff plan that allows subscribers enjoy lower rates of 25 kobo per second forvoice calls from a peak of 50 kobo per second.
The unique selling pointof the value proposition is that subscribers could make calls to anyoneregardless of time, network or even location.
National operator,Globacom, launched a package in Port Harcourt that enables telecoms subscriberspay 25 kobo per second for all calls to any network in the country without anyrental or access fee. In addition, the package, ‘Glo Infinito’ offers freemidnight calls from 12 midnight to 5a.m as well as a bonus of between 10 percentand 20 percent for every recharge with N500 and higher.
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