Rising telecom prices in Uganda leave users no choice

Thursday, 8th September, 2011

The threat to block traffic to UTL by both Airtel and MTN following a debt dispute represents the mood within the industry, where each operator is trying to capture territory from a competitor in a tight market of dwindling fortunes.

Days to execution of the threat, Airtel Uganda and Uganda Telecom agreed that call traffic between their two entities will continue uninterrupted following a "mutually agreeable settlement".

But the two firms agreeing is just part of a problem solved. The industry’s unfinished business now is the reaction from a price-sensitive market.

A telecom chief once referred to the consumer as the "grass that no elephant (telecom firm) wants to trudge on" because if you do, "you the elephant suffers."

In the past 12 months, tariffs have swung from an average of sh11 per second to sh3 and then last week they bounced back to an average sh4 per second following the announcement from the three major operators MTN, Airtel and Orange.

The latest Wireless Intelligence Report, report titled "How pricing dynamics affect mobile usage" posted on mobile briefing found that the Effective Price Per Minute (EPPM) of mobile voice calls has fallen from a global average of $0.32 (sh904) in 2001 to just $0.09 (sh254) last year.

Over the same period, the average minutes of use per user per month has jumped by two-thirds, from 178 minutes in 2001 to 296 minutes in 2010 — or from three hours average talk time per month to five hours.

This was probably the case in Uganda until early last year. When the prices started to rise again and the economy began to shrink, key market operating indicators such as the ARPU (average revenues per user) and RPM (revenue per minute) were on the decline, according to the industry regulator.

Edgar Isingoma, a KPMG Uganda partner but an independent industry observer, thinks callers will have few choices regarding their call patterns.

"I don’t think they will have too much choice in terms of choosing to call less. Communication is a necessity like salt; you cannot say when prices go up, you will consume less salt," said Isingoma.

For business he said: "There is a correlation between how much you spend on calls and the revenue you get."

Since telephone bills are paid in shillings, operators have very few options of hedging against a depreciating shilling — a major reason given by telecoms for increasing tariffs.

"We are dealing with mass consumption. It is not practical to bill in dollars as a means of hedging," said Isingoma.

In Uganda, the time that individuals spend talking on phone has increased from an average 80 minutes per person per month to over 100 minutes over the last one year.

"Now with more expensive calls, people will not abandon talking but they will probably reduce on the time they spend on the phone," said an observer.

In the midst of the growing competition, quality has suffered. There has been rampant decline in quality such as dropped calls, failure in connection as well as slow delivery of messaging.

Today, the Uganda Communications Commission is hosting an operator-consumer public dialogue on the quality of service.

Analysts say what the UCC needs is to act with the firmness it usually does when it is acting on tariff structures and demand that the operators don’t give the public less than the quality service they claim to offer.

Currently there are over 12 million people with access to telephones up from just 3,000 in 1998. Network geographical coverage is also at over 90%. There is still a lot of room for increasing penetration depending on the creativity of the players.

The New Vision Newspaper