The 2010 Telecom price wars a boon to the fortunes of the ‘muturage’

Transforming the livelihoods of the rural poor also known as the “muturage” is government’s obsession as the economy embarks on the next phase of growth for the next 7 years. This includes increasing access to affordable mobile phone facility per households in the country’s rural areas. With Rwanda now registering a 36.2 percent mobile tele-density in which over 3.6 million of its over 10 million citizens are now considered to be active users of mobile telecoms, courtesy of the intense competition and, by extension, the huge price cuts, the effects of the increased use of telecoms can, thus, be said to be potentially “huge and transformational,” according to experts. Cheaper calling rates as was witnessed in 2010 naturally render the “muturage”, the rural citizenry, who constitute more than 70 percent of Rwanda’s population, an opportunity to be brought into the national telecoms networks through increased tele-density. Increased tele-density in turn, would empower the “muturage” to make more informed economic decisions.According to Rwanda Utilities Regulatory Agency (RURA), the industry regulator, the market expanded by 14 percent in the third quarter of 2010 as operators slashed tariffs amid increasing competition. Low income markets such as Rwanda’s rural landscape present what is termed by experts as a ‘prodigious opportunity’ for the world’s wealthiest companies to seek their fortunes while at the same time to bring prosperity to the aspiring poor. This is the kind of “win win” situation that government of Rwanda has been seeking as part of its broader agenda of economically empowering the “muturage” and, by extension, transforming their livelihoods in the coming days. This is the context in which the three licensed operators MTN, Rwandatel and Tigo, sunk over $200 million in the year 2010 to deepen service offerings in the telecoms sector. Numerous studies within this context have found a quantitative relationship between increasing mobile penetration and economic growth in developing country economies. One of such a study has been conducted by world renowned business guru Prof Coimbatore Krishnarao Prahalad, who is famous as the father of the concept of the fortune at the bottom of the pyramid. Prahalad preached to some of the leading multinationals that doing business successfully and in a mutually sustainable fashion with the world’s poorest people — requires radical innovations in technology and business models. Prahalad counselled that success in doing business in the third world countries will require investors to re-evaluate price–performance relationships for products and services. “It will demand a new level of capital efficiency and new ways of measuring financial success. For companies willing to take this kind of new risk, varying forms of rewards such as growth, profits, and incalculable contributions to humankind await them”, he said. This is precisely the kind of change unfolding within the local telecoms industry as the year comes to a dramatic close. While the status quo within the telecoms industry had to contend with very deep price cuts that will ultimately erode their bottom lines, the new dynamic shifts bring new forms of rewards dramatically to the operators capable of fully embracing new service values that are premised principally on boosting the fortunes of the “muturage”. A study by the London Business School indicates that an increase of 10 percent points in mobile phone penetration that is adding 10 new subscribers per hundred people leads to an increase of the gross domestic product by 0.6 percent points in developing countries. Another study by the World Bank puts this figure up 0.8 percentage points. However, analysts studying this linkage say that the real benefits of telecommunications in the third world only start when a country passes a threshold penetration rate of about 25 percent .This observation presents very refreshing insights on Rwanda, going by the latest statistics by market regulator, RURA. Early last year, RURA reported that the number of mobile subscribers in the country hit 2.4mn in 2009, signalling mobile penetration of 24 percent. RURA attributed Rwanda’s strong mobile subscriber growth in part to Tigo’s entrance. It also attributed the strong growth to the introduction of new promotions and services by market leader MTN. Experts at RURA are now saying that investment in telecommunications is a fast and efficient way to give an impetus to Rwanda’s highly ambitious transformation agenda for the next 7 years. “Our survey carried out at household levels that looks at the impact of use of mobile phone penetration touching specifically on the rural poor reveals very interesting observations giving us a confirmation that telecoms will be a real enabler of the transformation being pursued by government in the next 7 years”, Innocent Rurayisire, an economic expert at RURA, told Business Times just prior to close of the year. Ends