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Telcos scramble for more revenue – Part II

Wed, 5 Feb 2014 Source: Dowuona, Samuel Nii Narku

This is the second and final part of the article about how telcos are forced by increasing cost of operations to sometimes adopt even unconventional means to rake in more revenue so they could meet their tax and other obligations. The first part of the article touched on the recent increase in tariffs, the revenue share arrangements between telcos and their value added service providers, and the unsolicited communication which subscribers pay for without knowing.

The second part of the article touches on a straight up foul means some telcos use to undercut other telcos and sometimes deny the state of revenue, just so they (the telcos) would secure more revenue. This happens mainly on the international gateway with respect to incoming traffic.

SIM Box fraud has been a major plague. But it has become very obvious that very often there are fraudsters who scoop revenue from both telcos and the state through SIM Box fraud. There is however unconfirmed suspicion that some telcos actually engage in SIM Box fraud just to avoid paying appropriate taxes on international traffic to the state. But there is a different between SIM Box fraud and what some telcos are allegedly doing to undercut other telcos on the international front.

Foul Means

Some telcos are allegedly using foul means to increase and conceal their revenue. At least two telcos [names withheld for now] have been fined for engaging in what the regulator found to be the use of unapproved routes to terminate calls in Ghana, and undercutting of other telcos at the international gateway front between 2010 and 2012.

The two telcos were said to have charged less than the legally approved minimum of 19 cents per minute of inbound international call. By so doing, they undercut other telcos [particularly Tigo] and took traffic (calls) meant for the disadvantaged telcos and terminated in Ghana, using unapproved routes in some cases.

All telcos have international gateway through which they bring in international traffic for each other. But to ensure a level playing field, the law says no one can charge less than 19 cents per minute. But some telcos have been charging lesser than what the law stipulates, particularly when they are bringing in traffic for other telcos.

Some perspective: if a telco brings in international traffic to its own network, it charges 19 cents per minute, pays 6 cents to government and keeps the 13 cents. But if a telco brings in international traffic for another telco, it charges 19 cents, gives 6 cents to government and pays the other telco 8.5 cents, and keeps the remaining 4.5 cents.

What that means is that, the telco on whose network the call finally terminates could have brought in the traffic and kept the full 13 cents after paying government 6 cents. But because another telco brought in the traffic, that telco gets to keep 4.5 cents and the telco for whom the traffic was meant gets only 8.5 cents.

So what those two telcos allegedly did was that they went and negotiated with the international carriers and took 18 cents or 17 cents per minute for traffic meant for other telcos [particularly Tigo], and when they terminated the calls, they took between 2.5 cents and 3.5 cents, gave government 6 cents and the other telco 8.5 cents. In so doing, they got the international carriers to give them other telcos’ traffic more often, instead of giving it directly to the telco for whom the traffic was meant and paying 19 cents per minute.

The regulator judged that as a breach of the law, and an undercutting of competitors. And some tax evasion was also discovered in instances where the revenue declared meant the tax component was also lower. The regulator has therefore fined one of the telcos more than US$9.8million (GHC23.8million) for the offence. The other one has been fined a way lesser amount. But both telcos have challenged the fine.

One senior staff of one of the two embattled telcos is claiming what they did was not tax evasion but ‘tax avoidance’, which they claim was legal. That same person also said negotiations for termination of inbound traffic (calls) are done at the group level and they are won based on the group’s negotiation skills and competitive edge. So no telco can claim it was undercut.

It is however not clear how they could explain their way out of charging less than the legally mandated minimum of 19 cents per minute. The person claimed once they paid governments 6 cents and the 8.5 cents to the telcos they brought in the traffic for, it should not matter how much they charged. In fact, that person even dared to say that the fact that some telcos are breaking the law means the law is bad; as if to say the fact that people keep committing crime is a sign that the laws against crime are bad.

Price war and lower tariffs

Contrary to the scramble for increased revenue, through fair and or alleged foul means, each of the GSM players still ran promotions which they use as weapons in the heated price war.

Some of the promotions offer ridiculously low tariffs in some cases. And some of the telcos say an overwhelming percentage of their customers are on the low-tariff promotions, making the increased default rates almost irrelevant.

Vodafone for instance has recently launched four tariff plans under its Vodafone Red promo. There are Red Life Weekly, Red Hot, Red Classic and Red Rush all available for subscription on *200#. Each of the packages offer a lot of free voice minutes for on-net, off-net, IDD calls, plus data and SMS.

For instance, normally, GHC5 Vodafone credit gives only 33mins 3secs for those on the default 15Gp per minutes, and for those on the 8.9Gp plan it comes to 56mins 2secs. And that is without any credit available for SMS and data. But for GHC5, Red Life Weekly gives 30mins for calls to other networks, 300mins to Vodafone lines, 5mins to landlines in UK, USA and Canada, 100 SMSs and 100 megabytes of data.

To put this in perspective, 30mins to other networks plus 5mins to landlines abroad is 35mins, which is more than the 33.3mins default value that GHC5 normally offers. So for someone on Red Life Weekly, the 300mins Vodafone to Vodafone, 100 SMSs and 100megabytes data is totally free. And it gets better with the other Vodafone Red packages. But there is a one week limitation to consume all the credit on the Red Life Weekly or lose all. The other packages offer 30 days expiry period. And when one makes or receives web-based calls like on Viber, Tango and the rest, the data credit runs out fast too.

MTN Ntosuo simply gives 20 percent bonus for every credit recharged. No subscription. But there is a three-day expiry date. And the bonus is only for MTN to MTN calls, which sometimes kills the real value of the offer. But MTN Zone also continues to offer lesser rates of up to 60% discount as and when one makes calls. And credit bought with MTN Mobile Money also comes with 30% bonus for only on-net calls and three days expiry date, which kills the value.

Tigo has an SMS promo called Tigo Adanfo, where customers pay 10Gp and are allowed to send unlimited number of SMS the whole day. But the big one on Tigo right now is Tigo Free Bonto. With a subscription on *555*1#, one gets double bonus for every recharge between GHC1 and GHC4, and triple bonus for GHC5 and above. It allows customers to use the bonus to call both on-net and off-net, but at different tariffs from Tigo’s default tariffs

The charge on the double bonus credit is 8.1Gp per minute on-net and 9.18Gp per minute off-net, while for the triple bonus the tariff is 5.4Gp on-net and 7.2Gp off-net. This is actually lower, in all case, than the default rates, except in the on-net calls, where the default rate is 3.6Gp per minute, as against 8.1Gp and 5.4Gp for the bonuses.

Airtel Talk Chaw gives customers free Airtel to Airtel calls between 5am and 5pm every day once the customer spends as little as 30Gp. But one needs to subscribe at short code *525#. And whereas the communication says “free airtime from 5am to 5pm”, there is a limit of 100minutes per day or 3,000 per month. So if a user signs on and half way into the month he had used up 3,000 minutes for on-net calls, he would not have any more free minutes for the rest of that month. Airtel calls it ‘fair usage’.

Glo Bounce also gives up to 71minutes airtime to call other networks with every GHC10 airtime recharged and on-net calls are absolutely free even with zero balance. It also offers as low as 1Gp and 2Gp per minute in some cases, depending on a certain complex usage arrangement. Due to the complex nature of the promo, customers complain they are unable to monitor how much they are actually being charged.

The Glo offer is no doubt a good value too. But the subscriber base results for Glo indicates the Bounce promo is not paying off the way the telco had imagined. Moreover, it seems Vodafone has rocked Glo’s boat with the Vodafone Red packages.

It is also important to note that telcos are required by law to expressly publish the terms and conditions regarding the various promos to help customers make informed choices. But they largely do not publish the terms and conditions in the media; and a scan through their various websites indicate they have not published those terms and conditions there either.

For instance, Airtel claims 30Gp spend gives ‘unlimited’ on-net calls between 5am and 5pm. But in fact there is a limit of 100minutes per day, which is not obvious to customers. Tigo also claim to offer unlimited internet access in daily, weekly and monthly packages. But the truth is that there is a cap and the access is actually for browsing and not streaming and downloading. There are several others like that across networks.

The test

The telcos are obviously willing to give lower tariffs, but the increasing taxes and other operational cost factors are driving tariffs higher and making nonsense of the expectation that voice would be free in the next five years as the industry goes data.

And now three licensed LTE players are coming into the market. One of them, Surfline has announced it would start operations sometime this year and compete strongly against the traditional telcos in the data space. Five years on, the LTE license holder would also have the opportunity to go into the voice space. There is no telling what that could do to the revenues of the existing players if they did.

So the question still remains if Ghana as a country would pass the global test for completely free voice calls in the next five years; and whether the telcos will survive and still find the country a good place to keep investing more money. At least one former industry player has told this writer he would never invest his money in Ghana’s telecom industry under the current circumstances. The current circumstances being inflation in communication sector is the lowest and yet telco carry one of the heaviest burdens in terms of taxes, charges, levies and more. A critic of the government has actually accused the government of lazily placing taxes on telcos instead of finding other sources of revenue.

Vigilance

Meanwhile, the days when Ghanaians did not bother about how much they are paying for calls and other activities on their mobile phones are over. It is time to be vigilant and monitor credit consumption carefully because the channels through which credit/airtime run out are coming varied and complex.

The NCA has therefore mandated all telcos to do instant End of Call Notification, giving customers information on duration and cost of activity, the basis for that cost and the balance credit left. The NCA is working on ways to streamline the operations of VAS short codes to prevent the rampant unsolicited VAS service, which has become a major channel through which telcos and their VAS partners take money from customers without seeking proper permission.

Columnist: Dowuona, Samuel Nii Narku