A Zero Sum Game Is Playing Out Amongst GSM Operators

The National Bureau of Statistics has released its 2016 Q1 Telecoms report revealing a pattern that could change the industry as we currently know it. According to the data, even though the total number of subscribers has increased rapidly over the past decade (at the end of 2005 there were 19,519,154 subscribers, but by the end of 2015 there were 151,017,244) telecom subscriber growth has been declining more recently.

The NBS attributed this drop to “possibly as a result of high market penetration leaving less room for large expansion.” This in our opinion is a very significant conclusion which should have potential ramifications for the industry. As the telecom market plateau’s competition is bound to take a massively new turn. Fortunately, that turn could be for the better if you are a subscriber.

According to the report, in March 2016 there were 148,745,464 subscribers compared with 143,934,208 in March 2015 suggesting a negative growth decline when compared to the end of the 2015. So rather than grow subscribers numbers are declining, a further confirmation that the market as somewhat approached its peak. While that may seem true, it doesn’t mean there is not from for growth for GSM operators. Unfortunately for them, that growth will have to come at the expense of the other. It’s a zero sum game like no other.

The competition

Here is another excerpt from the NBS — MTN and Etisalat

The difference in trends that began in August 2015, between MTN and Etisalat on the one hand and Globacom and Airtel on the other, continued into the first quarter of 2016. Despite a slight recovery for both providers in March, Etisalat and MTN nevertheless saw their subscriber numbers fall, from 22,161,290 in December to 21,877,542 in March for Etisalat (a drop of 1.28%) and from 61,252,387 in December to 57,045,721 in March for MTN (a drop of 6.87%). Each provider also recorded a year on year decline, of 1.61% and 6.71% respectively.

Globacom and Airtel

By contrast, Airtel and Globacom continued their uninterrupted upward trend in subscriber numbers; Airtel recorded monthly increases of 2.75%, 1.33% and 0.81% in January, February and March 2016, and Globacom recorded increases of 0.59%, 2.75% and 1.78%. As a result, Airtel had 33,866,798 subscribers in March 2016, which is an increase of 18.08% relative to March 2015. Globacom had 34,608,793 subscribers, which is an increase of 17.01% over the same period. Airtel’s and Globacom’s respective shares of the total number of GSM subscribers in March 2016 were 22.98% and 23.48%, higher than in any previous month over the last two years but nevertheless still significantly lower than MTN’s share of 38.70%. Etisalat accounted for the smallest share as in previous quarters, with 14.84% of subscribers.

From above you will observe that despite a decline in overall growth numbers, Airtel and Globacom both recorded double digit year on year growths while MTN and Etisalat recorded declines.

What this could all mean

This all boils down to competition at the end of the day, just that this time it will be intense and personal. GSM Companies will produce new attack ads that drives at the very taste of their subscribers. We have already started seeing this with attack ads from MTN, Etisalat and Airtel. This is bound to continue and will be a new phase in the fight to retain subscriber base.

Apart from advertising, we will also expect to see more deals and promotional activities driven at retaining market share. Subscribers will get more free calls, bonus airtime and other freebies just to make them stay.

Two reasons further buttress this view. Firstly, is the fact that subscribers can now port at will from one service provider to the other. Porting is clear evidence of competition which also indicates where the market is headed. People port at street corners, malls, via apps and other social media tools making porting more seamless and easy to handle. Secondly, is the fact the the disposable income of most Nigerians have dropped sharply due to the fall in the price of oil. The impact has been hard on Nigerians who now have little choice but to prioritize their disposable income. It is very likely that GSM related expenses will be one of those relegated to the back leaving operators with no options but to lower prices and provide further incentives.

Porting data from the NBS currently shows there was a total of 51,301 incoming porters in the first quarter of 2016, compared to 42,843 in the same quarter of 2015, an increase of 19.74%. This was largely as a result of an increase of 159.97% in the number of subscribers switching to Airtel, although Globacom also saw an increase of 42.55%. Compared to the final quarter of 2015 when there were 52,335 porters, there was a slight decline of 1.98%. The low porting data could also be seen as further evidence that operators are fighting hard to keep their subscribers offering them freebies and incentives. They also realize that the user acquisition cost incurred on signing up new subscribers is far more expensive than the cost of keeping what they currently have.

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