'SWAZI MTN MO­NOP­OLY BEEN BAD - TELE­COMS GURU

Observer on Saturday - - Front Page - By Bodwa Mbingo

Swazi Mo­bile, the coun­try’s sec­ond mo­bile net­work op­er­a­tor, will go live in the next two weeks. De­spite en­ter­ing the mar­ket when there is al­ready an ex­pe­ri­enced player fol­low­ing a mo­nop­oly of over 20 years, Swazi Mo­bile is backed by ex­perts as a com­pany that will be able to swim with the sharks in the mo­bile telecom­mu­ni­ca­tions in­dus­try.

The na­tion waits anx­iously for the new mo­bile telecom­mu­ni­ca­tions player to go live this month and ex­perts reckon it is about time for them to come aboard.

Our ex­pert is of the view that Swazi MTN, de­spite hav­ing dropped its prices just on the eve of Swazi Mo­bile com­ing aboard, such a move will not nec­es­sar­ily work in their favour as the com­pany’s per­for­mance dur­ing the 20-year mo­nop­oly will come back to judge it harshly where it con­cerns cus­tomers’ pref­er­ences be­tween the two com­pa­nies.

Re­spond­ing to ques­tions from this news­pa­per on whether Swazi Mo­bile will be able to come aboard and im­me­di­ately be able to stake its claim in the mar­ket, the ex­pert in the field, who pre­ferred not to be iden­ti­fied, but is fa­mil­iar with the in­dus­try, re­sponded to the af­fir­ma­tive, stat­ing that the mo­bile telecom­mu­ni­ca­tions cus­tomers are look­ing for­ward to the new player in the in­dus­try.

He said this de­spite that in the neigh­bour­ing South Africa, Cell C found it hard to break into the mar­ket and live up to its prom­ise as it was a late en­trant to a mar­ket al­ready dom­i­nated by Vo­da­com and MTN.

Cell C re­mains a speck in the dis­tance be­hind Vo­da­com and MTN: it is yet to reach the 20 per cent mar­ket share that the then-CEO boasted about when it launched in 2001.

The com­pany has only just recorded its first net profit, and its prospects of clos­ing the gap to its two Go­liath­like ri­vals seem van­ish­ingly slim.

If the goal, for the reg­u­la­tors, was in­creased com­pe­ti­tion, it worked al­most im­me­di­ately.

But what­ever Cell C did, its ri­vals were able to match.

And while then-CEO Talaat La­ham ini­tially saw Cell C turn­ing prof­itable by year five, it did not hit that goal.

Com­ing back to the sit­u­a­tion at hand in the coun­try, our ex­pert feels that Swazi Mo­bile will not nec­es­sar­ily fol­low in the foot­steps of Cell C.

“We un­der­stand that a new com­peti­tor is com­ing to the mar­ket. I would say it’s about time. Although it’s al­ready too late in the day, but there can be no bet­ter time than now.

At the out­set, I would ar­gue that any new com­peti­tor who en­ters the mo­bile tele­phony space in Swazi­land is more likely to suc­ceed than fail de­spite the ar­ti­fi­cial mar­ket-dom­i­nance of the ex­ist­ing in­dus­try player.

“Mo­nop­o­lies and other en­ti­ties born out of pro­tec­tion­ist mea­sures as seen in Swazi­land of­ten find it hard to hold their own in a dereg­u­lated en­vi­ron­ment.

Po­si­tion

Their de­fault po­si­tion at the first sign of com­pe­ti­tion is to di­rectly dip into their vast war chest or use price cuts, in or­der to ward off com­pe­ti­tion. Af­ter all, they can af­ford it. They eas­ily ex­ploit their dom­i­nance through mas­sive price-cuts in like-man­ner con­sis­tent with their propen­sity to ar­ti­fi­cially in­flate user-charges for 20 years,” ob­served the ex­pert.

The ex­pert noted that for al­most 20 years, mo­bile tele­phony in Swazi­land has thrived largely on the back of pro­tec­tion­ist poli­cies and of­ten through opaque and in­di­rect sub­si­dies, which were not read­ily dis­cernible to the un­peeled eye.

He said these fac­tors, com­bined with unchecked and un­reg­u­lated high en­duser charges, en­sured the ar­ti­fi­cial suc­cess of the play­ers which were first to en­ter the Swazi mar­ket.

He said while pro­tec­tion­ist mea­sures, on and by them­selves, are not nec­es­sar­ily bad if the tar­get out­come is known and well-de­fined, they be­come ex­tremely harm­ful to the whole econ­omy, and even the mo­nop­oly en­tity it­self, if such mea­sures are open-ended as to last for some 20 years.

“Com­pa­nies that owe their suc­cess to pro­tec­tion tend to gen­uinely for­get how to com­pete, lit­er­ally. This hap­pens, sadly enough, with­out them even re­al­is­ing it un­til sud­denly dereg­u­la­tion comes along and a new com­peti­tor is an­nounced.

Dereg­u­la­tion is an ex­tremely dis­rup­tive event in the life of a mo­nop­oly en­tity. It is so dis­rup­tive and dis­turb­ing that in­stead of cre­atively rein­vent­ing and repo­si­tion­ing it­self as a dom­i­nant player, the mo­nop­oly en­tity would of­ten re­spond by cut­ting its prices. That’s their first port of call,” he noted. He ob­served that while end-users may wel­come the cut in prices, the mes­sage that they would have un­in­ten­tion­ally con­veyed is that they have been over-charg­ing cus­tomers, in this case for some 20 years.

He said this does not usu­ally es­cape the at­ten­tion of end-users and nei­ther does it au­gur well with them.

If any­thing, it be­comes in­deli­ble in their minds and even toxic to the point that these cus­tomers can’t wait to sign up with any new en­trant.

“When­ever mo­nop­oly en­ti­ties sud­denly cut prices with­out a good com­mer­cial jus­ti­fi­ca­tion, it means they aren’t able to put to­gether a good value propo­si­tion fast enough to re­tain clients; it could also mean they need a lit­tle more time to think about an ap­pro­pri­ate re­sponse be­cause they’ve been caught nap­ping. In some in­stances, it could sug­gest that they have abused their mar­ket-dom­i­nance all along in or­der to achieve su­per­nor­mal gross mar­gins, at the ex­pense of the user,” added the ex­pert. The telecom­mu­ni­ca­tions guru also noted that in the mind of the cus­tomer, this be­comes a highly toxic mix­ture to swal­low with­out flinch­ing. He said cut­ting prices as a first re­sponse to emerg­ing com­pe­ti­tion is a tell-tale sign that the com­pany has for­got­ten how to com­pete in an open mar­ket. He said price wars that are in­formed by fear of los­ing mar­ket share are of­ten detri­men­tal to ev­ery­one in the long run.

These mea­sures do not serve the best in­ter­est of the com­pet­i­tive land­scape nei­ther the in­ter­est of the econ­omy, he noted.

He said, how­ever, value-for-money pack­ages and a good value propo­si­tion to the cus­tomer, will al­ways trump a knee-jerk price-cut that can­not be sus­tained even in the best of times.

“In other words, my view is that a new com­peti­tor com­ing into a newly dereg­u­lated en­vi­ron­ment in Swazi­land stands a very good chance of suc­cess as long as it chooses the right tech­nol­ogy.

Busi­ness

And since mo­bile tele­phony is a rel­a­tively cap­i­tal-in­ten­sive busi­ness than most in­dus­tries, sourc­ing long-term and in­ter­est-friendly fund­ing is cru­cial. Lastly, build­ing a recog­nis­able brand that will ap­peal to the hearts and minds of Swazis is crit­i­cal. At present, there’s no such a brand.

The one we cur­rently have evokes dis­dain, if not down­right angst.

The abil­ity to com­pete ef­fec­tively and win is one of the most rudi­men­tary ne­ces­si­ties of any en­tity worth its salt. Mo­nop­o­lies, no mat­ter how suc­cess­ful they might ap­pear now, tend to fail dis­mally when con­fronted with a com­peti­tor bent on tak­ing the fight to the en­e­mies’ camp,” he con­cluded.

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