Nigeria becomes first African country to ban mobile promotions, lotteries

Extreme competition is eating into operators' ability to maintain network quality

Nigeria has become the first country in Africa to ban telecom operators from engaging in the type of promotions and lotteries that are being blamed for a deterioration in the quality of mobile services.

The action by Nigeria, Africa's largest telecom market, is aimed at restoring order in the telecom sector and reflects the thinking of other regulators in the region regarding poor services. Competition has steadily been chewing into operators' profit margins, causing many of them to fail to expand their networks and services.

Rising inflation rates in the region and the low cost of communications -- the result of a price war -- have stifled operators' revenue and curbed tax contributions to governments.

Nigeria's decision is expected to have ripple effects in many other African countries where operators, including MTN, Airtel, Globacom and Etisalat, operate.

Tired of fining the operators for poor services, the Nigerian Communication Commission (NCC), the country's telecom sector regulator, decided to indefinitely ban promotions and lotteries in the country. The NCC has cited anti-competitive practices by operators for its action.

According to Tony Ojobo, director of public affairs at NCC, the commission had been flooded with complaints from customers and industry stakeholders about the various promotions and lotteries offered by the country's telecom operators.

Through promotions, operators give as much as two hours of free minutes for a limited period of time. That has, however, been creating congestion in the networks as subscribers try to use up the available minutes within the given period, according to Edith Mwale, telecom analyst from Center for ICT Development.

At the same time, operators generate profits from lotteries as subscribers send text messages, priced at US$0.50 per message in some instances, in hopes of winning.

"Competition is really the root cause of the promotions and lotteries because each operator wants to maintain and attract more subscribers to the network but in the process, the quality of services are compromised," Mwale said.

The action taken by Nigeria, Mwale said, deserves to be taken up by all regulators in the region to bring sanity to the sector as network congestion causes dropped calls, connection failures and slow message delivery.

Anti-competitive practices and behavior by the operators include on-net calls at tariffs well below the prevailing interconnection rates set by the regulators, critics say.

In Zambia, the Zambia Information and Communication Technology Authority (ZICTA) has also cited anti-competitive behavior by operators for poor quality of service. ZICTA warned that it may soon be forced to institute punitive measures against operators for anti-competitive behavior.

In South Africa, the Competition Tribunal in August this year set a precedent by imposing a heavy fine on Telkom South Africa of about $55 million for anti-competitive behavior.

In December last year, operators in East Africa united in cancelling all promotions, which were causing uncompetitive behavior, and raised tariffs to meet the high operation costs.

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Tags: Center for ICT Development, Zambia Information and Communication Technology Authority, regulation, Etisalat, Globacom, MTN, government, Airtel
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