A few days ago, ₦3,000 would have gotten you 6GB of internet data on Globacom’s network. Today, that will fetch you 12GB. That is insanely cool. A month ago, ₦3,500 was enough to buy 4GB on the Airtel network; now it’ll buy 7GB. Both MTN and Etisalat have also revised their data plans in a bid to compete on this front.
I’ve spent some time wondering why there’s this sudden price crash from the major telcos. Could it be because of competition, or the fact that the NCC removed the data floor price, or both? Also, I’m wondering what impact the price reduction will have on the revenue of each of these telcos.
We will consider each of these points one after the other, starting with the NCC’s removal of the data floor price.
The importance of NCC’s data floor price removal
On October 13, 2015, the Nigerian Communications Commission approved the removal of the data floor price limit, giving internet service providers the freedom to drop their data prices as low as they can go. Before then, there was a limit to how low ISPs could fix their prices. If this mode of pricing sounds familiar, it’s because it is. This is what the federal government is pulling off with the current fuel pump price, where oil marketers cannot sell petrol above ₦145. So the ISPs could compete for customers with low prices, but they could only go so low. This explains why Globacom (Glo) and Airtel had already started offering more affordable data plans before the announcement was made.
NCC had set the data floor price limit as a way of ensuring smaller ISPs and ‘upcoming’ telcos had the chance to compete with the bigger, already established ones. But I doubt this plan worked out as intended. How many new ISPs have been established in recent years? And has any new ISP been able to build up enough momentum to challenge the big players? No. So the plan did not work, and NCC had to do away with it.
Once the data floor price was out of the way, ISPs (including the telcos) now had the liberty of dropping their prices and revising their data plans as they saw fit.
Enter the role of competition.
To compete, or not to compete – that is the question
In September 2015, a month before NCC removed the data floor price, MTN had the highest amount of internet subscribers among the 4 major telcos – and by some margin too. Going by the NCC’s Internet Subscriber Data report of May 2015 – April 2016, MTN had 41.8 million internet subscribers – that’s almost 100% more than Glo’s 21.9 million subscribers. Airtel was third with 17.7 million and Etisalat fourth with 15.6 million.
One month after the floor price removal, in November 2015, MTN lost 1 million subscribers (40.8 million), Glo gained 3 million (24.9 million), Airtel lost close to 1 million subscribers (16.8 million), and Etisalat lost close to half a million (15.2 million). I assume it was around this time that Glo revised their data plans again and introduced their ridiculously cheap Campus Booster data plans and other packages of the sort.
By April 2016, MTN had lost almost 10 million internet subscribers (32.4 million), while Glo had gained almost 5 million (26.3 million). Airtel’s internet subscriber base fell from 17.7 million in September 2015 to 15.3 million in April 2016, while Etisalat’s internet subscriber base rose to 17.2 million from 15.6 million.
The deactivation of unregistered SIM cards on each of the telecoms networks should also be factored into any loss of internet subscribers.
Looking at these figures, it’s obvious that Glo has been the big winner so far in the ongoing data war. For all the others to compete with it, they have to drop their prices and revise their data plans. And that is what they are doing. Although, many Etisalat internet data subscribers are claiming that the quality of internet service they get has reduced considerably. This leads me to the next point.
What is the impact of the new data plan prices on the telcos?
I’m pushed to ask if these telcos are really ready to fight for customers in the boxing ring of data plans. If this fight goes on, will someone get knocked out because they couldn’t keep up, or is my question too drastic?
I mean, if Etisalat customers are already having to deal with the baggage of slow internet attached to cheap data, I think it is okay to ask these questions.
MTN’s sudden revision of their data plans in May 2016 seems to me like a reaction to what is happening to their internet subscription numbers, and not a result of planned action. I can compare their move to Coca-Cola’s response to Pepsi Nigeria’s ‘long throat bottle’ campaign. When Pepsi increase the size of their bottles (Pepsi, Mirinda, and 7up) by 20%, Coca-Cola reacted by doing the same thing. Perhaps it was losing customers to Pepsi, and was having none of that. But I remember what happened the last time Coca-Cola reacted to the threat of Pepsi, it angered the world by changing the Coke formula and revenue suffered for it. I worry that this may be the fate of some of the telcos in the long run. But then, I am only speculating.
According to Yomi Kazeem of QZ Africa, mobile data revenue is growing and is expected to top $22 billion by 2019. On the other hand, the growth of mobile voice revenue is slowing down, and is only expected to grow by $5 billion by 2019; note that it was at $50 billion in 2014.
The plan for the telcos is to get their data prices as low as possible to gain more customers and make it cheaper for Nigerians to access the internet.
“By making mobile data cheaper than it’s ever been,” Yomi says, “telcos are hoping to gain more users who might later upgrade to more expensive plans.”
For us, the consumers, cheaper data plans means we can consume more digital content than we used to. For content producers, it means access to more customers and more potential for revenue.
But with the access to more content and the opportunity for more content producers to create, there will also arise the need for consumers to control and determine what they consume. Information overload is not fun.
We could go on and on about what this new development holds for Nigeria. There’s much to look forward to, and I’m excited about to be a part of it. Aren’t you?
Update: This article has been edited to factor in the deactivation of unregistered SIM cards as a reason for the loss of internet subscribers on some of the telecoms networks.
NEW REPORT: Nigerian startups raised $17.6m in Q1 2019, 8.5% higher than they did in Q1 2018. Find out more in the latest quarterly edition of the Nigerian Startup Funding Report here.
On the 1st of June 2019, Techpoint will host over 3,000 leading experts, enthusiasts, innovators, entrepreneurs, career professionals, and policymakers in Lagos at #TechpointInspired, the largest tech conference in West Africa, where issues Future of Work, AI & Robotics & Blockchain and many more will be discussed Techpoint Inspired. Register now.
There will be a private dinner for Speaker and VIP holders on the 2nd of June. Get a ticket now