Usually when you see all players in an industry pricing their products the same, it tells you there is a cartel colluding to fix prices. Cartels may decide to accept their respective market share positions and so fix prices to ‘comfortable levels’ by collusion. Usually that’s bad for the consumer because there will no longer be any competition motivated price changes.
The Zimbabwean mobile telephony market has equal level of pricing. NetOne has announced their new pricing just like Telecel and Econet did. They are priced at the very same level for voice:
- Econet: $0.2157 per minute
- Telecel: $0.22 per minute
- NetOne: $0.2199 per minute
No one is going to be jumping over from one network to any other over those micro differences in pricing.
Why are the tariffs the same?
All the networks have simply adopted the maximum tariffs that the Postal and Telecommunication Regulatory Authority of Zimbabwe (POTRAZ) has permitted. The POTRAZ circular on tariffs instructed MNO’s to charge a maximum of $0.17 per minute before taxes.
The operators have simply taken that maximum. In their negotiations with POTRAZ, the MNO’s wanted an average of $0.40 per minute but POTRAZ would have non of that. Now, they are taking all they could get.
What does that tell us?
Fact that the operators are all pricing at the regulated maximum tells us that the regulated tariffs may actually be unsustainable. At least one of them would have wanted to compete on price to gain market share but none of them can afford to.
We analysed the financial performance of the sector as reported by POTRAZ for the full year 2018 and indeed things don’t look too well for the operators. You can check out the article which shows they are most probably all making losses in real value terms.
Further proof
Further proof of the unsustainability of the pricing is the fact that all the operators continue to price peak and off peak calls the same as well as on net and off net calls. They don’t have any margin to pass on to the consumer.
Poor cartel
Ordinarily cartels fix pricing above what the market forces would otherwise have determined. The whole objective is to get more from customers and not to race each other to the bottom in terms of pricing. Of course such collusion is illegal and when found out authorities like the Zimbabwe Competition and Tariff Commission will persecute.
In our telecoms sector we have a different kind of ‘cartel.’ They are pricing at the same level not to fix the customer but so they could be a little profitable or perhaps a little less unprofitable.
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5 comments
That’s one view.Well you forget that telephony has been on the decline anyway… It’s mobile and mobile money where the money is at and thus may stir binnovations… Furthermore an increase in price in a depressed market would have further deteriorate telephony revenue. This could actually spur internet usage
Agree with the above would switch to WhatsApp calling. No real choice… If it’s 50c per minute… Mind you I’m already doing that as much as possible
There’s no cartels in Zim. There are indecisive companies that hide the fact that they copied price structures from elsewhere by changing decimal values. It happens all the time, Econet sets it’s prices and everyone follows. If it’s profitable for Econet, it should be profitable for everyone else.
Even in the banking sector, when legislation changes certain banks are quick to release charges and product configurations, whilst other banks just wait and see what others are doing. In between they’ll just tell you, we don’t have that facility yet.
If you were ask for a breakdown of the costings used to derive the prices, I’m pretty sure some companies won’t even be able to produce a breakdown.
Yes Nice and Stories. The operators have also to content with whether or not we can afford whatever price levels they want. They may turn out to be worse for them
You brought up a sector I wanted to use as an example in the article!
Banks always have the same fee structure. I think it’s because they are content with their respective market positions and don’t want the burden of thinking too much. Sad though because it becomes price fixing by default and we consumers are at the receiving end