Was naming MTN SMP a blackmail? – Part 1

Let me begin by saying I completely support naming a telco a significant market power (SMP) provided there is ample evidence for that. What I am against is using an otherwise prudent policy as a political weapon for the purposes of blackmail, if that indeed happened; and that is a very big IF.

On June 8, 2020, the telecom industry in Ghana was rocked hard with the announcement that market leader, MTN Ghana has been named SMP. The Ministry of Communication, therefore, issued a directive to the National Communications Authority (NCA) to initiate the processes to implement policies aimed at correcting the imbalance in the telecoms sectors, particularly to ensure a level playing field among the telcos. Going by just what meets the eye, i.e. the market share and revenue figures, this move will pass as a noble one because it is long overdue. But it would appear that in Africa, as far as politicians are concerned, there is more to any move than just what meets the eye.

Let’s look at what meets the eye.

The Ministry in its statement said “Industry Statistics released from the Statistical Bulletin – Quarter 4, 2019 of the National Communications Authority (NCA) indicate that MTN has almost 75% of telecommunications market share. A review of these reports has (sic) shown that this has been the trend over a three (3) year period. This trend has continued into the first quarter of 2020 as well. These statistics while impressive and showing growth within the telecommunications and financial sectors clearly show an uncompetitive and unprofitable environment for less dominant players in these industries.”

The Ministry was obviously quoting a document owned by the regulator, NCA, which says MTN has had almost 75% market share for the past three years. It is still not clear how NCA arrived at that figure. This writer has made a formal request to the NCA for some explanation of the 75% figure. NCA has promised to proffer some explanation but it has been days and the explanation has not come yet, in spite of consistent follow-ups. While we wait for that explanation, let us look at what figures the same NCA published for MTN in the fourth quarter of 2019 and the first quarter of 2020 and attempt a layman’s calculation of an average.

FIGURE 1: MTN market share for the past three years, and first quarter this year

Period Voice (%)2G/3G (%)4G (%) Total Average (%)

2017 48.44 56.29 (incomplete) 56.53 (incomplete) - - 2018 55.21 59.74 92.86 207.81 69.27

2019 55.21 71.72 91.23 218.16 72.72

2020 57.07 72.01 91.39 220.47 73.5

Source: NCA Website – Telecoms Voices and Data statistics

NB: The 2017 figures on the NCA website were a little dodgy, as one table covers only January to September and another table covers from January to July. Even though one table is labelled 4G, it had all the non-4G players on the table, but the BWAs were rather missing.

So per the layman’s calculation in the table above, MTN’s market share grew from 69% to almost 73% between 2018 and 2019, then moved up by some 0.5 percentage point this year. That is close enough to 75%. But this is all still a layman’s calculation as we wait for the NCA’s explanation.

Per the table, it is clear MTN virtually owns the 4G space. Practically, it is a monopoly, even though technically it is not. Going by the above, it makes sense why government is now doing what they should have done long ago – declare MTN a significant market power (SMP).

Indeed, any market share above 40 per cent for one telco in Ghana should have triggered a declaration of that telco an SMP, and the necessary policies effected to correct the imbalance. MTN crossed the 40 per cent mark years ago but the NCA and government had sat by and watched the imbalance grow even bigger only to jump in now. Let look at a few of MTN’s market share from years back: 2013 – 46.13%, 2014 – 45.63%, 2015 – 46.43% and 2016 – 48%. So what has NCA and MOC been waiting for all this while – was it a case of the previous ministers and NCA bosses not having the balls to do what was necessary, or there was something fishy going on, which prevented them from doing so?

HHI

Could it be that the real justification for declaring a telco SMP is not just the market share numbers that meet the eye, and that there may be something more technical to the whole process? One of the key things the government is seeking to cure the lack of competition in the market. A commonly accepted system for measuring market concentration and competitiveness is the Herfindahl-Hirschman Index (HHI). It is calculated by squaring the market share of all players in the market and summing them up. The result should range between 0 and 10,000. When the result is closer to zero, it means the market is competitive. But when it is closer to 10,000, it means the market is are nearing a monopoly.

So let’s do some math, even though it is purely theoretical, particularly for an emerging market like Ghana:

Voice subscription: MTN – 57.07%; Vodafone – 20.94%; AirtelTigo – 20.25% and Glo – 1.74%. The squares of the foregoing numbers are MTN – 3,257, VODAFONE – 438.5, AIRTELTIGO – 410.1, and GLO – 3. So the total is 4,108.6. This figure is clearly closer to 0 than it is to 10,000, indicating on paper that Ghana’s telecom market is competitive and no monopolistic. So maybe that is what has kept previous governments and the regulator from declaring MTN the SMP in spite of its obvious runaway market share for many years.

Hard work

Admittedly, MTN did not get to where they are just by being favored or just because some ministers and regulators didn’t have the balls to call the shots, or by taking cover under HHI. It was by dint of hard work, research and impeccable understanding of the market. A few examples will do. When mobile cellular technology first came into the country, OneTouch (now Vodafone) and Mobitel (now AirtelTigo) sold SIM cards at the prices of “cocaine”. It was an elitist and luxurious item. The average Ghanaian would have had to spend about two month’s salary to get one SIM card from OneTouch or Mobitel. They practically cut the masses out of the service and made it a symbol of prestige. Even the ones who could afford it had to queue for a long time before they could lay hands on one.

Spacefon (now MTN) came in and decided to go mass market. They sold SIM cards for cheap and spread towers all over the place. Before the elitist networks could say jack, Spacefon was the household name, even though the two were in the market before Spacefon came. That trend continued as Spacefon became the first to do much customer-centric mass-market stuff, like SMS, as the others kept dragging their feet and playing only at the high-end.

Fast forward to MTN; a purely African company with a great understanding of a typically African market; they continued in the footsteps of their predecessors and catered to the needs of the masses based on research. To cut a long story short, MTN was the first to start mobile money in Ghana. Based on research, they realized the best way to get Ghanaians hooked on was to offer over-the-counter-service – where customers gave money to merchants to send on their behalf, as opposed to the ideal situation, where the merchants loaded money on the wallets of the customers for the latter to transfer it by him/herself. That was the ideal Kenyan-Safaricom M-Pesa model.

It begs to say a million times that while MTN was using that ‘unideal’ but well-researched strategy to gain market share, the Vodafone Ghana CEO then, Kyle Whitehill rubbished what MTN was doing, and made a boast that mobile money was a Vodafone invention (Safaricom Kenya) so they had the blueprint, which they would unleash to take mobile money to the next level. Once again, Vodafone was following in the footsteps of its predecessor, OneTouch and was completely oblivious to what works in Ghana. The CEO was obsessed with some blueprint that, at the time, had no relevance to the Ghanaian market. MTN understood the market and did what Ghanaians wanted. The result today is their whopping 94% mobile money market share, which is making everyone, including the government shiver in the spine, as the country pursues a cash lite society agenda, with mobile money, and for that matter, MTN firmly leading the charge.

So Spacefon-Areeba-MTN did not get to the top just by being here and playing idealist and elitists games. I remember in 2009, Vodafone did a promo dubbed “Vodafone Rewards” and gave away some US$1million Trasaco Valley mansion plus a Mitsubishi Pajero 4x4 car to one person who may not even be able to live in and manage such a huge and luxurious property. At the time, MTN was doing promos that put some relevant value in the lives of many customers rather than one huge value in the life of one person. I wonder how that paid off for Vodafone, but the current numbers are there to show.

I also remember when Vodafone was given the tag “elitist network”, they denied it to the tooth and they started a scheme called “Happy Feet”, where the CEO and his executive went to the markets to interact with the masses. But around the same time, the then CEO rubbished the concerns of their broadband customers publicly and that did not go down well with the masses. All this while, a certain MTN was delighting customers and gaining market share even when more players were coming into the market and chipping away the market share of other players.

Engagement

Like all the other telcos, MTN has many faults; in fact, more faults than the others by reason of their size alone. But MTN engages customers and talks them through challenges, whereas Vodafone and Tigo tended to cater to the needs of elite customers quickly and gave the masses irrelevant template responses. I quite remember I had an issue with my Vodafone airtime. For more than once, I had close to GHC10 airtime but I was told I had no airtime and I could not make calls. I had to complain several times. I got three totally different responses from three different workers in the company. Eventually, I went to NCA for assistance before Vodafone finally admitted it was their fault. They never even compensated me for the inconvenience. In the end, the problem never got solved so I had to port my Vodafone number to MTN and it has remained so to date.

It is also important to note that MTN has from day one made media engagement a regular feature. Big on their calendar is their annual Bright Media Forum, where they share all the details of their business with the public through the media. Subsequent to that, they also hold similar engagements across the regions and continue with quarterly engagements, plus regular training for media personnel and even daily engagements on various social media platforms.

The other telcos have received free advice to not be shy to copy at least that strategy, but they have not bothered to. Maybe per the culture, they come from, such close engagement with the media is a taboo or seen in a certain light so they would rather keep their distance. But the question is, which strategy is working in Africa – the answer is