CAIRO: The National Telecom Regulatory Authority (NTRA) said, according to local media, that it would spell out new guidelines to stipulate future pricing rules for the country’s three mobile phone operators.
The announcement comes on the heels of, but cannot be directly tied to, a formal complaint issued by Telecom Egypt (TE) last week, arguing that price wars were dramatically affecting its bottom line.
“The reason behind submitting this complaint, wrote Beltone Financial in a note, “was that Telecom Egypt was facing fierce and unfair competition with mobile operators, particularly during Ramadan, as a result of the aggressive promotions mobile operators have been offering subscribers.
Both industry leaders Vodafone and Mobinil had reduced their on-net calling rates to LE 0.05 per minute for Ramadan, down from LE 0.20 per minute. They reduced the off-net calling rate from LE 0.30 per minute to LE 0.19.
Etisalat, the third largest operator, made an across the board cut to LE 0.15 per minute.
While price wars have been ongoing for the past several years, they intensified to an unprecedented level this Ramadan. The idea was to hook users who would stick with their plans after the Ramadan deals ended. Vodafone and Mobinil best embodied this by offering incentive to their customers to call on-net.
The ferocity of the competition has surprised some observers who saw Vodafone and Mobinil tending to take different approaches to the market: Mobinil often pursued high market share, while Vodafone usually targeted high worth customers.
But TE has called foul. In a formal complaint to the NTRA last week, TE claimed that the price wars were anti-competitive.
According to some analysts, though, TE may have reason to complain.
“The local tariffs for a fixed line are the lowest in the region at LE 0.03 a minute starting the second minute, said Nadine Ghobrial, telecom analyst at EFG-Hermes.
In other words, TE’s prices are already so low that the telecom giant has little wiggle room. Add to that the fact that fixed-lines are in decline across the globe, and TE’s worries come into sharper focus.
Analysts indicate also that TE’s business model is designed such that international calling is the cash-cow to support the domestic calls, which leak money for the company.
“They’re essentially subsidizing their local tariff with the international tariff, said Ghobrial.
At the end of the day, though, the government takes a heavy hand in evaluating telecom pricing. Through the NTRA, it has tolerated price competition for several years. It even approved the rock bottom prices the companies are offering this month.
But reports now indicate that the NTRA will attempt to take some pressure off the government-owned fixed-line operator by insisting that the three mobile operators ease up on the competition.