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NCA begins regulatory action against MTN

Fri, 4 Sep 2020 Source: Goldstree Business

The judgment by an Accra High Court delivered on Tuesday, which effectively has dismissed an appeal by MTN Ghana for a judicial review of the National Communications Authority’s decision to classify it as a Significant Market Player (SMP) has fully opened the door for the telecommunications industry regulator to take regulatory actions against MTN. While NCA says the actions are to curb predatory pricing by the dominant market player, which is threatening competition in the industry, its prescribed solutions will increase, rather than lower user tariffs, a situation that is worrying industry analysts and customers who understand the issues.

However, some of them are cautiously supporting the regulator on the grounds that if MTN’s overwhelming market share dominance is not curbed now, the company would eventually be in position to fleece customers later, when it has priced its competitors out of the market, which the regulator fears would eventually happen.

But opponents of the NCA’s decision point out that while the law was created to prevent a company with monopoly power from using its market strength to over price its products and services – by forcing it to lower its tariffs – in this case the impending regulatory actions aim to force MTN to raise its tariffs in order to enable its competitors do likewise without becoming uncompetitive in terms of their own pricing.

Indeed a key regulatory action which the NCA intends to apply, now that the court has dismissed MTN’s appeal for a judicial review, is that it will set a floor below which the company cannot set its tariffs for various products and services. This will ensure that MTN cannot set tariffs below levels at which its competitors can match them and still be profitable, a situation that exists now because MTN enjoys superior economies of scale and much bigger customer base, the latter meaning that most of its services begin and end within its own network. Indeed, NCA also plans to force MTN not to set lower tariffs on its calls and value added services within its own network, than those on its services that require interconnection between its network and those of its competitors.

Since most calls are within MTN s network because of its dominant market share, this means the company will be forced to raise the tariffs paid by most mobile telecom service users in Ghana.

MTN Ghana as at the first quarter of 2020 controlled 58 percent of the voice telephony market and 68 percent of the data market. As at 2016, the company’s average market share was just 46 percent indicating that its market dominance has been increasing at the expense of competition between networks within the industry.

Instructively, the high court did not address any of the underlying financial issues in its ruling since they were not part of the case presented to it by MTN as the plaintiffs. Rather it simply ruled that NCA is within its legal rights to declare MTN an SMP since it has the requisite regulatory powers, and did not abuse those powers in the process applied to classify it as such.

Source: Goldstree Business

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