West Africa: The great mobile pricing mystery – who’s cheap and who’s expensive

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Even for the sophisticated consumer, comparing mobile rates in Africa is a complicated business because often clear information is simply not available. The position is further complicated by the blizzard of tactical marketing promotions when operators make you an offer you can’t understand. But beneath this confusion is a key issues for the operators themselves about how they set pricing. Russell Southwood and Kelly Wong look at analysis of prices in West Africa and seek to work out what it all means.

Balancing Act’s report African Telecoms and Internet Markets: Part 1 – West Africa looked at comparisons between retail, domestic mobile calling rates across the 16 West African countries under review. The sample of rates covered 35 out of 52 operators in the selected countries, 67% of all operators in the region. The sample covered 150 calling rate plans, both pre- and post-paid. The rates taken from the operator web sites come in a bewildering range of different formats but they have all been standardised for the purposes of comparison.

The data was gathered between April and Mid-May 2007 and rechecked in August 2007. At the initial point when the data was colleced, 16 of the operators either did not have web sites or if they had one, did not make their rates publicly available. Some required users to ring sales staff to check rates. Not listing calling rates for consumers shows a lack of transparency that means users are unable to make rate comparisons between operators. Even though rate structures are always complicated, they allow (as we will show below) some level of useful comparison to be made. Lack of information makes it harder for a competitive market to operate. A significant number of operators are “guilty” of not providing rate information.

Prices are not set through some mystical process but broadly speaking come about by bringing two sets of understandings to bear. They can be cost-based: an operator looks at how much it costs to deliver the service and prices its minutes accordingly. However, no operator is an island and all of them set prices in relation to what their competitors are doing. Put simply, these are the theoretical bases for cost-based and market-based pricing.

Despite the considerable number of price promotions that operators run to attract new customers, few operators seem to have a consistently applied pricing strategy designed to achieve particular commercial goals. Indeed the CEO of one leading African mobile company admitted to us that there was no overall strategy to its sales promotions.

Some operators see themselves as low-price operators and others seek to maintain higher rates but faced with the realities of the market, prices seem to be retained or go down almost randomly. Although an imperfect measure, there are enough variances in ARPU between countries to lead one to suspect that operators seek to let rates stay as high as possible if there are no other downward pressures on them.

The blizzard of tactical promotions often obscure the fact that there is often little price differential between operator rates, particularly in the less competitive markets. Overall, complexity of the rates on offer make it extremely difficult for consumers to make immediate comparisons between operators’ rates.

Operators are also balancing a number of pricing issues. Although it is fiercely denied, the level of the wholesale interconnect rate between operators is bound to have some impact on the final retail price. Furthermore, there are intimate links between international mobile calling rates and the rates offered by fixed line operators and in the grey market. When one Nigerian operator brought international calling rates down to US16 cents a minute, both fixed and mobile operators had to drop their retail prices.

The domestic calling rate comparisons given below are grouped as Off Peak and Peak rate and each covers three rates: terminating “on network”; terminating on another mobile network; and terminating on a fixed network: in each case we have taken the top and bottom ten rates out of the 150 calling plans analysed. This gives six tables of top and bottom rates each for off-peak and peak rates, looking at 20 different rates in each category analysed. This method means that 120 out of the 150 calling plans are covered by this analysis In terms of the per minute cost in different categories, the following emerged:

Off-Peak – On network US0-62 cents

Off-peak – Other network US0-62 cents

Off-peak – Fixed network US0-83 cents

Peak – On network US8-62 cents

Peak – Other network US14-62 cents

Peak – Fixed network US0-93 cents

In order to analyse some of the patterns in the data we have arranged it into tables below of cheapest and most expensive. On the basis of the method used, any operator has a chance of appearing in 60 “slots” (6 tables of ten rates; three off-peak and three peak) for the cheapest rates and an equivalent 60 slots for the most expensive rates.

On this basis, the operators offering the cheapest call plans were Orange, Millicom, One Touch, Comium and Bell Benin, whilst those offering the most expensive were Celtel, MTN, Telecel and Bell Benin.

In country terms, Ghana, Senegal, Nigeria, Sierra Leone, Benin and Liberia had the cheapest call plans, whilst Cote d’Ivoire, Niger, Burkina Faso, Nigeria and Benin had the most expensive. Overall, francophone country call plans were more expensive than those found in Anglophone countries.

Does market share play a part in price choices? Although numerically the largest category, almost none of the incumbent or independent-owned companies have the dominant market share in their country of operation. The exceptions are in those places where there is not yet anything approaching full competition: for example CV Movel in Cape Verde that still has a de-facto monopoly; and Guinetel in Guinea Bissau and Togo Cellulaire that have only relatively recently faced competition from another company. The only incumbents with market leadership are Gambia’s Gamcel and Mauritania’s Mauritel, which is privately owned by Vivendi’s Maroc Telecom.

In 10 out of the sixteen countries under review, the three leading sub-regional mobile brands are market leaders:

MTN Benin, Ghana, Liberia, Nigeria

Celtel Burkina Faso, Niger and Sierra Leone

Orange Cote d’Ivoire, Mali and Senegal

Within these groupings, Celtel and MTN are disproportionately represented in the most expensive category. But MTN’s representation in this category is boosted by a series of relatively expensive, post-paid rates.

We will be carrying out further rate analysis of mobile calling plans and will extend this analysis to other parts of the continent. If you are an operator whose calling plans were left out because they were not published, we would be happy to receive those calling plan rates and add them to the database. Please send details to: info@balancingact-africa.com

If you would like to have the full data spreadsheet and the analysis based on it, buy a copy of African Telecoms and Internet Markets: Part 1: West Africa. Click on link below for details: