Tigo’s entry sparks off an intense telecom price war

Tigo Rwanda, the third national operator’s entry into the local telecoms market has hyped intense price wars between the sector operators. The fierce price war that is raging has left consumers as the major beneficiaries.
The intense competition occasioned by TIGO’s entry has sparked off a raging price war in the sector
The intense competition occasioned by TIGO’s entry has sparked off a raging price war in the sector

Tigo Rwanda, the third national operator’s entry into the local telecoms market has hyped intense price wars between the sector operators. The fierce price war that is raging has left consumers as the major beneficiaries.

Despite denials by managers of the already existing operators—GSM market leader MTN and fixed line incumbent and data leader Rwandatel, those keenly watching including market regulators Rwanda Utilities Regulatory Agency (RURA) have noticed substantial reductions in the unfolding price drama within telecoms over the last three months.

Rwanda’s telecom operators are now enticing their clients with discount structures that reach an all time high of 90 percent.

Further still, customers are spoilt for choice through cash bonanzas and other attractive incentives. These huge discounts are applied to varied standard tariffs by the operators.

MTN charges Rwf109.8 as base rate while the new kid on the bloc Tigo, levies a standard rate of Rwf90 per minute. Rwandatel offers two variants of standard tariffs. ‘Isange’ is levied at Rwf1.2 per second on Rwandatel to Rwandatel calls, while ‘Vuga’ is set at Rwf72 per minute also on Rwandatel to Rwandatel calls.

It is the various discount structures by the three operators that have largely defined the tone and pitch of the price wars in the telecom sector. MTN has ‘MTN’ Zone which is a unique offer based on a caller’s location with the highest offer set at 90 percent.

Rwandatel has ‘Nukupe’ charged at Rwf 0.69 per minute or Rwf500 talk time for 12 hours on Rwandatel to Rwandatel calls. Tigo runs a Rwf10 per minute promotion on Tigo to Tigo calls.

The price movements are seen as one of the key value drivers for penetration rates in tandem with RURA aspirations for the sector to hit six million subscribers by 2012. By press time the combined subscriber levels for the three players stood at just below three million—less than half of RURA’s penetration targets by 2012.

‘MTN Zone’ kicks offprice wars 

MTN was the first operator to fire the opening shots of this price war. ‘MTN Zone’, launched in September 2009 (three months prior to Tigo’s entry), is a package that gives real time discounts to customers everyday. Consequently the package has attracted over 50 percent of MTN’s subscriber base. MTN management says that customers enjoy discounts of up to 90 percent.

“This product optimises the use of our masts across the country by offering discounts based on level of usage of the particular mast at a particular time. The fundamental thing about this product is that it is not a promotion but a permanent package,” said Yvonne Makolo, MTN Rwanda Senior Marketing Manager while speaking to The New Times.

According to Makolo’s statements, MTN has established a permanent discount structure rather than a periodic price movement. This has proved to be fundamentally different from the two other operators.

However, MTN Zone’s permanent structure has resulted into a responsive tariff rhythm by the two other competitors.

When asked by The New Times in regard to the extent to which MTN has been slashing its prices, Makolo insisted that MTN has not implemented any price cuts over the last three months.

“What our customers have been enjoying has been driven by ‘MTN Zone’ as well as our seasonal offers,” Makolo said, emphasising that, “price cuts have never been the key to driving subscriber numbers.”

She further explained that investment in network roll out, affordable handsets, value added services and a superior distribution network that enables products to be at arm’s reach are key in acquiring customers.
However, keen observers have noticed that MTN has substantially been cutting down on certain aspects of its pricing. 

For instance consumers say that  MTN’s Short Message Service (SMS) tariffs has seen steady cuts in the last three months. From a high of Rwf 50 per second it dropped to Rwf 30 just prior to Tigo’s entry.

It now stands at Rwf 15 meaning that there has been a more than 50 percent reduction on  SMS charges by MTN in the last three months.

Makolo said that ‘MTN Zone’ is also partly attributed to MTN  hitting the 2 million subscriber target recently. She added that in the emerging new scenario with the advent of a third player, “the Rwandan market is very discerning.

The consumer demands quality of service and value for his money and doesn’t necessarily go for what is cheapest in the market”, she added.  “At the end of the day what the different operators do- gives choice to the customers who have the power to decide what best suits their needs”.

Rwandatel’s cocktail of offers

On its part Rwandatel says that its commitment to provide the most affordable tariffs to customers predated both the ‘MTN Zone’ and the entry of Tigo.

“To make access to Information Technology Services is a cornerstone of our offering. Since the launch of our GSM operation in December 2008, we were the first to introduce 100 percent bonus for calls across networks,” Cleophas Kabasiita, Rwandatel’s Corporate Affairs Manager told The New Times.

In June last year Rwandatel  introduced its  ‘10 for 30’ freedom profile  in which customers enjoyed 30 days of free talk with a phone that was sold at Rwf10,000 only.

During the same period, it reduced its ‘on-net’ tariff from Rwf85 to Rwf72 per minute and slashed its SMS charges from Rwf40 to Rwf10 while introducing on-net and free SMS between 11:00 p.m and 6:00 a.m on a daily basis.

This was closely followed by ‘Vuga’ and ‘Isange’ tariff. These are per second and per minute tariffs which Rwandatel contends to be the lowest tariffs on the market to date. With these tariffs, Rwandatel did away with its call set up fees.

Rwandatel’s latest offer is an affordable phone dubbed ‘akanyenyeri’. It sells for Rwf8,000 and comes with Rwf18,500 worth of airtime and Rwf300 free on-net SMS.
Kabasiita acknowledged that the intense competition may have affected tariffs in general. She was quick to concede that other equally important factors played a role in Rwandatel’s price cuts. 

“It is important to note that pricing of a unit of airtime or any of our products is based on so many other factors which include; hardware network costs, operation costs, taxes and expected subscriptions,” she added.

To keep stiff competition in check, Rwandatel introduced a weekly loyalty program that gave it the opportunity to reward its customers based on their continued patronage.
Just prior to Tigo’s entry Rwandatel gave away almost Rwf50 million in customer appreciation which boosted its subscriber base to reach 515,000. 

Tigo’s ‘David and Goliath’ strategy

Tigo’s dramatic entry at the end of 2009 has been marked by its keenness to ruffle the feathers of the two operators from day one. Tigo’s ongoing promotional package can be equated to the ‘David and Goliath’ strategy into Rwanda’s telecom fraternity.

Tigo has drastically cut down on its call tariffs by a whopping 88.9 percent from Rwf90 to Rwf10 per minute.
The promotion is taken as the new operator’s key entry mechanism as it digs deep into the market.

Officials say that it could last for only six months since it was launched. However, the tariff is only applicable on Tigo to Tigo calls. Tigo’s ‘David and Goliath’ strategy can also be seen through its SMS offer where it has instituted another massive 95 percent price cut from Rwf20 to Rwf1.

Consequently the numbers have started accumulating for Tigo. Marcelo Alema, Tigo’s Chief Executive Officer (CEO) informed The New Times that it has already secured just within its 100 days of operations a five percent share of the local market. 

“Tigo’s market penetration is moving at a steady pace. This trend is a reflection of a new dawn for future telecom business in Rwanda,” Alema said.

“As competition in the telecom business continues to intensify, consumers will be treated to a range of choices and favorable services,” added Alema.

It has not escaped observers that Tigo is keen on capitalizing its low tariff package to boost its subscriber base.

At this rate, customers are left to determine the progress of the price wars while the players in Rwanda’s telecom industry—MTN, Rwandatel and Tigo continue to intensify their battle to capture more ground.

Ojiwah@gmail.com  

Have Your SayLeave a comment