The number of people with lines increased enormously from only 14% of the estimated 12 million population in 2008 to 40% by March 2010. Prices of mobile SIM packs fell substantially from a peak of US$100 to the current level of US$1.
Concurrently, network coverage within the country has widened and even the remotest areas are now covered. Disappointingly, while the coverage improved, the quality of services on all the networks went from bad to worse. It seemed all the millions pumped in by operators went into expansion as the trio fought for market share at the expense of improving the service.
Incidents in which consumers felt shortchanged by the networks are plenty. The rate of dropped calls in the country is probably one of the highest in the world. For instance, every subscriber experiences three dropped calls each time he tries to make a call. With a billing cycle of one minute at first and 30 seconds thereafter, the high rate of failed calls would mean more costs for subscribers. Of course the networks were benefiting a lot from this distorted billing model as the huge amounts they splashed out on extravagant advertisements – billboards, print space, airtime on radio and television- bear witness.
Thank goodness the regulator of telecommunication services in the country; POTRAZ, eventually prevailed over mobile service providers and implemented per-second billing. September 1 2010, was set as the deadline for all networks to comply. Simply put –– per-second billing means that subscribers only pay for the seconds they have spent on the phone. This is contrary to the previous practice whereby a fixed charge per minute is levied even if one would have spent a lesser duration on a call.
NetOne was the first to launch per-second billing on May 1 2010, a scenario that should have increased competition in the marketplace as a fair charging system typically lures subscribers from other networks. However, that move was not much of a benefit because it was only intra-network and in any case NetOne has the least number of subscribers.
The duo of Econet and Telecel has moved to per-second billing from September 1 with the former splashing out on advertisements of the new system. In the build up to its implementation there was a strong rumour that the networks would let subscribers choose between per-second and per-minute billing. According to that rumour per-second billing was supposed to carry a premium above the standard charge. That the pioneer, NetOne, simply divided the minute tariff by 60 when it launched in May could have compelled others to follow suit as doing otherwise would have been seen as perpetuating the fleecing of subscribers.
The coming into effect of per-second billing will undoubtedly change the landscape of the local mobile industry. Consumers will obviously benefit from reduced phone bills. On the other hand, their minutes of use could go up, a scenario that is likely to result in network congestion. There is a possibility that subscribers could also reduce the use of text messages preferring voice over data. Empirical evidence reveals that the average minutes of use in countries that have adopted per-second billing jumped by 20%.
Mobile operators will feel the full brunt in the form of reduced revenues. There is substantial evidence that companies that implement per-second billing experience a reduction in both revenues and profitability. This is because any call below a minute was previously charged a tariff for a full minute. For instance, in the past a five second call between mobile networks would cost US23c. With per-second billing the cost will be only US2c. Ordinarily, people do not spend much time on social calls with most conversations being 20 seconds long. Networks will also lose revenue they would have got on all dropped calls that were formerly charged as a full minute.
Most companies in India which launched per-second billing in 2009 saw their combined revenues dipping by 16,7%. Average revenue per user dipped by between 5% and 12% when per second billing was introduced in 2009. EBITDA margins also dipped at a time when operational costs remained unchanged. As a result mobile telecom share prices in India plunged as investors downgraded their profitability outlook of companies. In the six months to 12 November 2009, shares in leading mobile companies Bharti Airtel, Reliance Comm and Idea Cellular shed between 62% and 16%. Tata Tele was the only gainer advancing 17%.
In the light of that, it will be interesting to see how the Econet share which has been wobbling for more than eight months will respond to this new development.
Interim financial results for August should be good because per-minute charging was in place. But future earnings are likely to be severely reduced. It’s sad news for investors but subscribers will be loving it, no doubt.