CAIRO: Telecom Egypt (TE) announced this week that it had filed a complaint to the National Telecommunications Regulatory Authority against the country’s mobile phone operators for what the fixed-line giant called unfair pricing practices, local media reported.
In order to boost business, the three mobile operators have launched something of a Ramadan price war that, says TE, is hurting business.
This latest round in the race to the bottom, as far as prices go, began when Mobinil and Vodafone both announced their intentions to slash on-net traffic rates for Ramadan to LE .05 per minute, down from LE .20 per minute.
Etisalat followed suit, reducing its prices, both on and off the network, to LE .15.
Last week, in an effort to keep up with Etisalat’s off-net move, Mobinil and Vodafone each reduced prices from LE .30 to LE .19.
While on-net promotion plans bolster each company’s client base, off-net promotions have strengthened the mobile sector on the whole. In other words, the mobile operators are making it cheaper to call just about anyone – except landlines.
A week ago, TE executives publicly complained that the cheap per minute rates the mobile operators were offering only kicked in at the third minute. The operators, TE accused, were misleading consumers about this detail through their advertising.
Khaled Hegazy, Vodafone Egypt’s corporate affairs director, told Daily News Egypt at the time that the “Ramadan offer is clear and the conditions are properly spelt out.
Because these near-giveaway prices are only effective for the month of Ramadan, though, some see TE’s saber rattling as a means for the telecom giant to slow the mobile sector’s steady long-term price decreases.
“Telecom Egypt seems concerned about mobile operators aggressive promotions and their effect on reducing mobile-to-fixed traffic. However, the mobile promotions are only offered for one month and, hence, are not permanent, which should not be deemed threatening to the long-term operational performance of Telecom Egypt s voice revenues, wrote Beltone Financial in a statement.
What, in more legal terms, TE stands to gain by filing a complaint with the NTRA remains to be seen. In the strictest terms, the NTRA is meant to approve any changes in rates, so it could rescind its approval of the Ramadan prices.
In Egypt, usually operators get the regulator s approval before making an offer like that, said Nadine Ghobrial, a telecom analyst at EFG-Hermes.
Since the offers end when Ramadan finishes, though, not much is expected to happen from a legal standpoint. From a cultural point of view, though, analysts see a risk for TE.
“Even though the mobile promotions are offered for one month only, and are not permanent, the psychological impact (resulting from subscribers development of the habit of calling mobile-to-mobile, due to the significantly lower calling rates on mobile networks) could be harmful to the operational performance of Telecom Egypt s voice revenues, wrote Beltone.
TE’s expressed frustration over the mobile pricing, though, is indicative of the changing times in which the company has found itself. With fixed-line calling on the decline, the company is eager to carve a new niche for itself.
Most recently, it seems that TE is moving towards establishing itself as a force in the internet sector. Earlier this summer, the company placed a bid to buy LinkDotNet, which is being sold by Mobinil. It’s a move that seems to be recognition of the dated business the company is in.
Some analysts agree that TE has reason to be surprised by the aggressiveness with which mobile providers slashed prices.
Mobinil played its traditional part of leading in price reductions. The Mobinil philosophy has long been to maintain the highest subscriber market share.
Some were surprised, though, that Vodafone, which typically targets higher value customers, has recently adopted a new strategy of competing more aggressively for subscriber numbers.
“For the past two quarters, we have seen Vodafone directing its offers towards increasing its subscriber market share as opposed to their strategy which has always been focusing on revenue market share, said Ghobrial.
Wherever prices go after Ramadan, one thing is clear: the price wars are back in spades.
