'SWAZI MTN MONOPOLY BEEN BAD - TELECOMS GURU
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.
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.
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.