Sim Card Registration Could Mean Bad Business for Uganda Telecom Companies

1-March-2012

Mr Joseph Waitaka, a businessman has four active Sim-Cards that he uses to call cheaply within a particular network. Mr Waitaka, however, says he may not register all the four Sim-Cards as required by the Uganda Communications Commission (UCC) due to a tight business schedule. Mr Waitaka says he will instead choose one or two of his favourite network service providers to register with but not all the four.



UCC recently ordered that all mobile phone users should have all their Sims registered, lest they fail to make or receive phone calls or send text messages as all unregistered Sims will be deactivated by the respective service providers come March 2013.

Uncertainties
The nationwide exercise that is scheduled to start on March 1, 2012 seeks to check the use of mobile phone numbers for illegal activities, phone theft, unsolicited and threat messages among others.

Mr Waitaka’s reaction is similar to what players in the telecom industry are anticipating.

Warid chief commercial officer, Mr Shailendra Naidu told Prosper that although a big number of Ugandans have multiple Sim-Cards, most of them would not be comfortable going through a similar process with the different players and would rather drop some numbers, a move that could dip revenue in the industry.

"With Sim-Card registration, you either do it or you will be forced to drop the number if it is not registered and this will see a drop in subscriber numbers. Today it is possible for any one to just pick up a Sim-Card and use it but that won’t be possible tomorrow," he said.


Airtel Uganda managing director, Mr VG Somasekhar, however, holds a different view. He told Prosper that the thinking that Sim-Card registration may reduce telecoms’ subscriber base is just a hypothesis.

"Sim Card registration has been done and proved successful in other countries and we expect a similar response in Uganda because genuine customers will always register their Sim-Cards irrespective of being on different networks," Mr Somasekhar said.

Despite being one of the fastest growing sectors in the economy, the telecom industry has also witnessed the toughest competition in the last one and a half years following the arrival of other players including Warid Telecom, Orange and Smile in the local market; bringing the number of mobile service providers to six.

Customer base fight

The scramble for market share and subscriber numbers forced players in the industry to not only lower their call rates within and across networks but also slashed prices for Sim-Cards to make it easy for one to acquire one.

The price of sim-Cards dropped significantly from a market average of Shs70,000 in the 1990s when mobile service provision in the country was a game about two players to between Shs1,500 and Shs3,000 at various authorised telecom shops and as low as Shs500 on streets currently.

The Shs70,000 pack comprised of a Sim-Card, monthly service fee of Shs18,000 and some airtime.

Also important to note is that after realising that they can not completely lock out their competitors, telecoms introduced dual-sim phones to allow customers, especially those who had been ring-fenced within particular networks flexibility to call cheaply within the network.

Warid, for instance, introduced the Daboline, Orange came in with Nalongo, Ssalongo for Airtel while Uganda Telecom also introduced a series of dual sim phones in the market.

Telecoms then started boasting of increased subscriber numbers as a result of multiple Sim-Card acquisition and cheap calls within networks.

Available statistics from the Information and Communication Technology Ministry indicate that there are about 16 million mobile phone Sim-Cards in the country and the number is expected to hit 17 million by the end of this year.



MTN claims that its customer numbers grew to 7.5 million as of June 2011, Airtel claims to have a subscriber base of about 4 million while Orange has about a million subscribers.

Multiple sim cards is also said to have aided in driving up tele-density in the country from about 30 per cent to close to 40 per cent. It is predicted that usage of mobile phones in the country could increase to 60 per cent within the next two years.

Some players in the industry, however, say that the price of buying a Sim-Card may also go up slightly as a result of the increased costs that are likely to be incurred in the registration exercise, which could also act as another inhibiting factor for people to acquire multiple Sim-Cards.

"It’s going to be expensive for us in terms of logistics because we have to put in place infrastructure to support the process and some of these costs will have to be passed onto the consumer in terms of a slight increase in the price of a Sim-Card," Mr Naidu says.

How telecoms generate revenue

He, however, says that since telecoms get 98 per cent of their revenues from old subscribers and only two 2 per cent from new entrants, players have to devise means and ways of ensuring that they retain the current subscribers.


Mr Somasekhar told Prosper that Airtel is currently involved in a number of activities including giving its customers incentives to encourage them to register their airtel Sim-Cards.

Other players such as Warid are also giving their customers prizes including plots of land and cash to attract them to register their Sim-Cards.

Uganda Telecom publicists, Mr Emmy Olaki, who said that it is unlikely that people will fail to register all their sims, especially those with related numbers, said his company plans to make the process as seamless as possible so that customers don’t find it an inconvenience but something they will want to do.

Orange Uganda chief officer strategy, Mr Edouard Blondeau, said that the player has opted for a phone-based registration solution to enable it quicken the registration process.

The quality of service offered by players could be another determinant of whether customers register a particular Sim-Card or not.

Poor quality service
The recent UCC Quality of Service survey report indicates that none of the players in the market meets its set quality of service benchmark rate for both blocked and dropped calls, findings that most players disputed.

UCC gives an allowance of the maximum proportion of call attempts on any network that should be blocked (a call attempt which although is initiated within the coverage area was not established or is not successful due to network failure) or dropped (that which is terminated by the operator’s network after call establishment but prior to normal termination by the calling or called party) is 2 per cent.

Telecoms with poor service quality will soon start to pay 10 per cent of their gross income in penalties, if the communications regulator goes ahead to implement a new penalties schedule that seeks to curb the continued deterioration in service provision.

The regulator recently said that telecoms that fail to meet their contractual obligations will be penalised effective next month, by parting away with percentage of their gross income.

Telecoms, however, instead asked UCC to do joint surveys, involving all players in the actual exercise so that when results are published to the public, not player will doubt the findings.



Utility: Telecoms’ challenges
Large share of revenue from subscribers. 98 per cent of telecom’s revenue is generated from old subscribers and a marginal 2 per cent from new entrants.

Multiple sim-cards a recipe for teledensity. Since many consumers have more than one sim-card, .

Poor quality service. A report commisioned by UCC shows that none of the telecom companies meet their obligations in terms of satisfying customers.

By Faridah Kulabako: The Monitor Newspaper