-New tariff floor aims to end price war and stabilize market
The Liberia Telecommunications Authority said on Wednesday, November 5, that its proposed new GSM tariff floor is meant to end the war between the country’s two GSM service providers (Lonestar Cell MTN and Orange Liberia), which is destroying the Liberian telecommunications industry.
According to an LTA release, “the entity has calculated in collaboration with Orange Liberia and Lonestar MTN that the cost for one minute of a telephone call is 0.0156 cents and that the cost for one megabyte of internet data is 0.0218 cents.”
It added, “this minimum price of 0.0156 cents for calls and 0.0218 cents for internet data will still allow Orange Liberia and Lonestar MTN to provide telephone and internet bundles for $1. The minimum price will still allow Lonestar MTN and Orange Liberia to offer 3-day promotional packages. Consumers will not experience any big change when the price stabilization begins next year.”
The LTA said it intends to end the “price war’ between MTN and Orange and, as such, is using the Telecommunications law of 2012, which forbids telecom companies from selling below their cost and, in enforcing the law, the LTA wants to stop telecom companies from selling telephone calls and internet data below their cost price, which they are now doing by offering free calls.
The LTA added that many other West African countries such as Nigeria and Sierra Leone have used this same price stabilization to improve the quality of service for consumers.
“Liberia has the lowest prices for telephone and internet in West Africa, with the price stabilization being introduced by the LTA in cooperation with Orange Liberia and Lonestar MTN,” the LTA said.
The LTA clarification comes on the heels of a public outcry after a document from the entity calling for public inputs on new tariff floor proposal circulated on Social Media. The document, which didn’t give detailed and clear explanation put the new cost of On-net Calls at 1.56 cents and ON-Net Data at 2.18 cents, which created confusion in the public, making many to think the cost meant dollars. In addition, many Liberians also thought that the new tariffs would have eliminated the three-day calls promotions offered by the two GSM companies in the country.
The LTA said “In 2012, some telecommunications providers began price promotions that pushed all the telephone companies into a price war. As one company reduced its price, the other undercut the price in a vicious cycle that eventually brought the price for calls and internet data to a level far below cost.
“The price for calls dropped from 14 cents per minute in 2014 to less than 1 cent per minute in 2017 and is still falling,” the release said.
The LTA release further said GSM calls and internet prices have become so low, that services are almost free. The Telecommunications regulatory body said, residents of Monrovia and its environs have been the beneficiaries of cheap calls, while people in other parts of the country are not benefiting from similar gestures. The LTA further stated that the pricing disparities drove smaller companies, including Novafone, West Africa Telecom and Libercell from the Liberian Telecommunications market, leaving only MTN and Orange to compete.
“In the beginning, the LTA was happy to allow consumers to benefit from the cheap calls and data, but the war between Orange and MTN has become mutually destructive, with each company trying to drive the other out of the market. Both companies are selling calls and data below their cost and price and are losing money’ but neither MTN nor Orange Liberia wants to surrender.
“Telecommunications is one of the largest contributors to Government revenue. When the telecom companies lose money, they pay less tax to the government that could be used for schools, hospitals, roads, and other developments,” the release added.
According to the LTA, the negative impacts of the price war between Liberia’s two largest GSM companies are enormous.
“If the price war continues, either Orange Liberia or Lonestar MTN will be forced off the market, thereby initiating monopoly in the GSM Service sector, risking the country to go back to the days when a Sim card was sold for US$65, giving that company the will to charge for services at any price. The losses of money by telecom companies impede their strength to construct new towers and expand their services to more areas in the country.
“We all know of many places where people climb trees to make calls and many other places where there is no signal at all. We all know of how our calls get dropped in the middle of a call. The quality of service is poor because the telecom companies are not getting enough returns to re-invest in improving the networks,” the release said.
The LTA said along most of Liberia’s major highways, telecommunications’ signals are weak or non-existent because telecom companies are switching off towers. This, the LTA said, is greatly affecting small towns and villages that are far from the main road, which is a disadvantage to Liberians dwelling in the rural areas.
According to the LTA, as telecom companies lose money, they will have to scale down on staff, which increases the country’s unemployment rate and add to the suffering of the Liberian populations. In addition, the LTA said the price war makes the Liberian telecommunications market unattractive, as new investors will be cautious about investing in the market due to the loss of money by Lonestar MTN and Orange-Liberia.
“The war between MTN and Orange caused the country to lose US$49 million between 2014 and 2017. This money could have opened more farms to market roads, put medicine in the clinics and bought books for our schools.
“The war between these telecom giants has to stop or the country will suffer. The LTA as the referee between Orange and MTN is taking action to end this war and stabilize the market,” the release said.