Mobile operators in Malawi seem to be baffled by emerging market dynamics, writes Mallick Mnela
The high capital expenditure of replacing 2G or GPRS network infrastructure with 3G or CDMA to tap into the growth of the data sector, has been followed by the voice segment of the market tumbling in terms of average revenue per user (ARPU) from US$12 in 2006 to $4 at present.
At least the growing ARPU for data gave some solace to operators but it was to be brief as ISPs also went mobile, courtesy of WiFi, in a desperate attempt to survive the turbulent market.
The local regulator, Malawi Communications Regulatory Authority (MACRA), then opened the competition floodgates by allowing fixed-line operators to compete in the mobile sector. This has seen Access Limited and incumbent operator MTL joining Airtel and Telecom Networks Malawi in the mobile arena.
However, while company strategists are overwhelmed by these rapid changes, customers have something to enthuse about.
“The good news is that these markets will likely force prices down in which the customer will benefit,” said business commentator Chikondi Chiyembekeza, and indeed, all the local companies are basing their differentiation on competitive rate plans and flamboyant promotions that have helped push the prices down.
For example, the operators have been seen to adopt a ‘low average revenue per minute (ARPM), high minutes of usage (MoU)’ strategy which lowers profit margins. However, many industry figures favour the adoption of ‘high ARPM, low MoU’ strategy for optimum profit realisation.
“All a customer wants is to communicate. If a customer can communicate the same way on different networks, then price becomes the determining factor,” said a senior telecommunications marketer with a leading local telecommunications firm. “Actually, low prices fuel penetration especially when mobile services are commoditised.”
Another paradox that continues to emerge in Malawi’s telecoms market is that the urban market is nearing saturation point at around 70 per cent while the rural market is picking up at 30 per cent.
While the urban market was regarded the anchor of the industry’s future, the tech savvy urban customers are engaging in behaviours that really do not bring more money anymore. For example, this segment now uses social media such as Facebook, Google Talk and Google SMS to text and chat with friends and family at the expense of the operator’s SMS service, cannibalising the operator’s revenues.
Some urban customers have also gone to the length of having multiple handsets to take advantage of the operators’ price wars and further compromising loyalty.
“Some promotional offers are irresistible,” said Patricia Namulewa, a Zomba resident. “So as not to miss out on such promotions, I decided to have multiple handsets.”
Loyalty is, therefore, fast becoming an issue and churn rates could be higher for an operator that is perceived to charge more than others.
The 70-30 urban – rural situation is the exact opposite of the country’s demographic composition with 30 per cent of Malawians living in towns and 70 per cent in rural areas.
To take advantage of this demographic disparity, local companies have been seeking to tap into the rural low-income market.
However, this is not the ideal market for operators to compete in. Dogged by the lack of the national grid electricity, which is accessed by less than 10 per cent of Malawians, in these areas, operators have been forced to use gensets which has raised operating expenses.
Additionally, the country has had an energy crisis for almost two years which has severely affected operators’ ability to expand their market share in the low income rural market. On the other hand, operators that have rushed to tap into this market segment have also acquired equipment that is solar powered.
“We realise that Malawians depend on communication for their various undertakings whether they are in town or in the rural areas,” said Airtel Malawi’s CEO, Saulos Chilima. “That is why we extended our network deep into areas where accessing telecommunications services was deemed impossible.”
While the majority of phone users are now ditching the feature phone for the smart phone, Malawian mobile operators such as Airtel and TNM have been selling basic phones at the subsidised prices of $11 and $13 respectively.
This has helped the companies to gain market share easily and given some hope that the 70 per cent potential rural market could be of strategic benefit after all.
However, as the rural masses have and continue to be connected, operators are finding new opportunities, the latest being mobile money.
Market leader Airtel was the first to launch its mobile banking service, Airtlel Money and competitor TNM followed swiftly after.
With people in the rural market largely being without a bank, this could be a good way to compensate for the declining ARPU in the voice segment.
Customers load money into a virtual account attached to their SIM at cash-in/ cash-out centres, often housed in local shops, and then send money to relatives in villages or buy goods from selected merchants.
“These services are welcome because they help me get my upkeep allowance from my son in Lilongwe without bothering to travel to the bank,” Jumah Adini, a 58-year-old farmer, said, adding that previously he had to budget transport money to travel a distance of over 30 km to access his allowance. “With the shortage of fuel, transport costs have gone up and by the time I returned home, I would have close to 50 per cent of the money spent on travel expenses.”
Mobile Money, or Mobile Banking as some call it, was originally launched as M-pesa in Kenya. There, it is believed to have raised ARPU by $0.75 and effectively helped to decrease churn. Malawian operators are diversifying in search of these though it will take time to gauge whether this strategy will be successful.
M-Pesa, Airtel Money and TNM’s Mpamba mobile money transfers have been well received in Africa. This follows failed attempts by E-Wallet (formerly Pay265) to do the same a few years ago.
Mallick Mnela
