MTN Ghana’s resort to the Supreme Court to win a reprieve against its classification as a Significant Market Player (SMP) by the National Communications Authority is stalling action by the telecommunications industry regulator that would result in significantly higher user tariffs on telecom services.
The NCA has formally informed MTN that it will impose minimum tariff levels on the industry leader’s services as well as disallowing it from offering preferential tariff rates on customers activities within its network as compared to tariffs it charges on calls and other services that terminate on the networks of its competitors. However, the regulator has opted not to enforce those measures until MTN’s legal challenge to its classification as an SMP – which empowered the NCA to impose those new pricing conditions in the first place – is resolved. Consequently, the NCA, having had MTN’s case against it in an Accra High Court dismissed, now wants an endorsement of its actions by the Supreme Court – where MTN has now taken the case to – before implementing its planned regulatory actions with regards to MTN’s service pricing.
This stay of execution by the NCA is basically optional since MTN has neither sought, nor obtained an actual legal injunction against the NCA’s implementation of its planned regulatory actions.
Nevertheless, if the Supreme Court rules in NCA ‘s favour, then it will enforce those actions. Expectedly, the minimum tariffs to be imposed will be significantly higher than the minimums currently charged by MTN, since the primary purpose of the whole exercise is to force MTN to charge tariffs that enable its competitors to raise their own to levels that enable them increase their profitability to sustainable levels while still remaining price competitive against MTN. Currently, MTN is leveraging on its superior market share and economies of scale to offer tariffs that keep it profitable, but force the competing networks to forgo significant profitability themselves in order to remain price-competitive against MTN.
NCA regards this as predatory pricing aimed at ultimately taking the market shares of those competitors and thus stifling competition in the industry.
However, higher tariffs charged by MTN in compliance with the NCA’s directive, and subsequent increased tariffs by its competitors would mean significantly higher cost of telecom services for customers.
Another impending regulatory action from the NCA, also forestalled for now by its ongoing legal tussle with MTN, calls for the company to stop charging cheaper tariffs for activities that are wholly within its own network, than for activities involving its competitors networks. Because MTN has an overall 58 percent market share, more often than not, customer activities are entirely within MTN’s network allowing it to offer rock bottom tariffs, either directly or through regular promotional pricing. This however persuades the general public to join MTN’s network in order to enjoy those tariffs, a situation which the NCA feels is enabling MTN to win market share from its competitors.
Indeed, MTN’s overall market share has climbed to about 58 percent currently, from below 50 percent just a couple of years ago. Its share of the data market segment is substantially higher still.
However, since most calls and data activities are within MTN’s network – and therefore enjoy preferential pricing – the forced ceasure of such would result in higher tariffs charged by the company on well over half the activities engaged in by customers in Ghana.
So far though, no timelines have been established for the hearing of the case against the NCA brought before it by MTN, which means that for charges by the network not increase. However, some customers who understand the unfolding situation’s implications fret that sooner than later, a significant increase in telecom tariffs will occur.
It is instructive that inflation in the telecom industry over the past decade has been arguably the lowest in the economy, adjudged by sector, and curiously, tariff increases have only occurred as responses to changes in government’s fiscal policies – a change in value added tax computations from ad valorum to specific and an increase in the communications service tax from six percent to nine percent.
Interestingly though, in July, government announced a cut in the CST from nine percent to five percent, effective from September 15. This has created hopes that if the telecom companies pass on the tax reduction in full to customers, it could compensate for the impending tariff increases That will result from NCA’s regulatory actions against MTN.