NetOne Increases Prices Too, POTRAZ Forces A Cartel Of Sorts

Zimbabwean telecoms, African telecoms, NetOne Zimbabwe, SIM Cards

Usually when you see all players in an industry pricing their products the same, it tells you there is a cartel colluding to fix prices. Cartels may decide to accept their respective market share positions and so fix prices to ‘comfortable levels’ by collusion. Usually that’s bad for the consumer because there will no longer be any competition motivated price changes.

The Zimbabwean mobile telephony market has equal level of pricing. NetOne has announced their new pricing just like Telecel and Econet did. They are priced at the very same level for voice:

Econet: $0.2157 per minute
Telecel: $0.22 per minute
NetOne: $0.2199 per minute

No one is going to be jumping over from one network to any other over those micro differences in pricing.

Why are the tariffs the same?

All the networks have simply adopted the maximum tariffs that the Postal and Telecommunication Regulatory Authority of Zimbabwe (POTRAZ) has permitted. The POTRAZ circular on tariffs instructed MNO’s to charge a maximum of $0.17 per minute before taxes.

The operators have simply taken that maximum. In their negotiations with POTRAZ, the MNO’s wanted an average of $0.40 per minute but POTRAZ would have non of that. Now, they are taking all they could get.

What does that tell us?

Fact that the operators are all pricing at the regulated maximum tells us that the regulated tariffs may actually be unsustainable. At least one of them would have wanted to compete on price to gain market share but none of them can afford to.

We analysed the financial performance of the sector as reported by POTRAZ for the full year 2018 and indeed things don’t look too well for the operators. You can check out the article which shows they are most probably all making losses in real value terms.

Further proof

Further proof of the unsustainability of the pricing is the fact that all the operators continue to price peak and off peak calls the same as well as on net and off net calls. They don’t have any margin to pass on to the consumer.

Poor cartel

Ordinarily cartels fix pricing above what the market forces would otherwise have determined. The whole objective is to get more from customers and not to race each other to the bottom in terms of pricing. Of course such collusion is illegal and when found out authorities like the Zimbabwe Competition and Tariff Commission will persecute.

In our telecoms sector we have a different kind of ‘cartel.’ They are pricing at the same level not to fix the customer but so they could be a little profitable or perhaps a little less unprofitable.