WHEN MOBILE PHONE COMPANIES OPERATE IN AN OLIGOPOLY
On September 30, the former deputy minister of finance Fraser Nihorya wrote on his Facebook timeline: “Airtel Malawi and TNM are operating as an oligopoly perhaps they have formed a cartel in which they collude informally in pricing their products.”
The status attracted comments such as: “They operate just like maize millers and that is why I have always argued about the role of Malawi Communications Regulatory Authority (Macra) in this regard.”
According to Wikipedia, an oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). Oligopolies can result from various forms of collusion which reduce competition and lead to higher prices for consumers.
While Nihorya and company have at least Facebook to voice out their concerns against the oligopolistic behavior between Airtel Malawi and Telekom Networks Malawi (TNM), mobile companies, he says he has never lodged an official complaint to the regulatory body or the Competition and Fair Trading Commission (CFTC).
In an interview Nihorya said: “The two companies have qualified to being oligopolistic which has price conniving as one of its characteristics.”
He said though he has never lodged a complaint officially, he would do it given a chance.
“I know they fix prices secretively, as the major characteristic of a cartel is the pricing system; these companies do exactly the same, they only differ in timing,” he claimed.
While Malawi’s economy is liberalised and companies are free to price their goods and services as they want, where is the consumer in the trend?
Consumer Association of Malawi (Cama) executive director John Kapito said as long as there are a few players on the market, consumers receive a raw deal.
He explained that the two mobile companies limit competition on the market and they emulate each other in terms of pricing.
“They only fight for advertising, but on the rest they operate as a family; comparing from one bad to another bad. They are not innovative and creative,” said the usually vocal Kapito.
He attributed the higher mobile tariffs to the oligopolistic market in which they operate.
Professor of economics at Chancellor College Ben Kaluwa defines oligopoly as a market characterised by few players.
He said: “Yes TNM and Airtel Malawi are oligopolistic and can be potentially monopolistic because the market is concentrated.”
As the definition suggests, consumers are bound to suffer in these market settings.
While consumers fill Facebook timelines with complaints against the actions of the two, it is surprising to note that CFTC that was supposed to protect them against such anti-competitive practices said it has no comment if anything is being done to establish if the two are in a cartel.
CFTC was established through a 1998 Act of Parliament and the Act aims at encouraging competition in the economy by prohibiting anti-competitive trade practices; regulating and monitoring monopolies and concentrations of economic power; protecting consumer welfare; strengthening the efficiency of production and distribution of goods and services; securing the best possible conditions for the freedom of trade and facilitating the expansion of the base of entrepreneurship.
“We have not conducted a fully-fledged investigation into the conduct, so we cannot conclude or overrule collusive tendencies,” said Wezi Malonda, executive director CFTC.
However, Malonda explained that the commission is monitoring the market before drawing conclusions on the two.
She said plans are at an advanced stage for CFTC in conjunction with Malawi Communication Regulatory Authority (Macra) to conduct a detailed market study to establish whatever is happening with these two mobile companies.
“During market studies, we dismantle the structure so that we identify areas where there are competition risks. Eventually, we come up with recommendations and action-based proposals on how identified problems should be addressed,” said Malonda.
She said the telecommunications industry is not highly competitive since it has few operators, therefore, consumers are forced to stick to the few.
Malonda said the commission has not had any talks with the two companies regarding pricing.
According to 2013 Information and Communication Technology indicators, there are 5.3 million users of mobile phones on the licensed networks.
The combined tele-density for fixed and mobile services currently stands at about 39 percent.
TNM was the first player in 1995 while Airtel Malawi was licensed in
1999 as the second mobile operator with tales of a third mobile company Celcom yet to roll out its services.
But where is Macra in all these?
Macra spokesperson Clara Mulonya said they have put in place systematic surveillance mechanisms to collect evidence and detect collusion in terms of pricing.
“Collusion is an anti-competitive behaviour and is greatly discouraged within the competition regulation of CFTC as well as the licence conditions of Macra,” she said.
However, TNM and Airtel Malawi officials did not respond to a questionnaire regarding the same after repeated reminders.
In the meantime, the consumer continues to suffer in silence in the hands of mobile phone operators in the country while waiting for CFTC and Macra to conduct detailed market studies.
Leave mobile companies for a while, look at the cement manufacturing companies in Malawi, Cement sells up to K7000.00 in many areas . At the current exchange rate Rand against MK our Cement sells for roughly up to R170.00 per bag. It makes our cement the most expensive in southern Africa. Why doesn’t the government begin to regulate the price of this product? No one will know yet the same government is quick to protect these manufacturers by restricting the import of this product. Let market forces dictate if your product is expensive allow the consumer to source it elsewhere at a reasonable price. we can never grow our economy in form of infrastructure development with these crazy prices.We are not fools not only mobile companies are colluding cement companies must also put under the microscope. people want to build decent homes but these prices are restrictive. It is crazy government must show to care and it is about time. Put ministers into place that can bite not toothless tigers
Facts please. Can we have a comparative table of what you are talking about. How much sells for what, where
Very interesting to note what MACRE and CFTC are doing in this saga. The two companies have strategised if you have observed. They know that Malawians are angry with them and anytime from now the anger is going to explode a kind of revolution or a kind of mob justice since MACRA and CFTC are not helping us. Now with this in their mind they are doing a fake social responsibility a kind of smear campaign so that people should perceive that they are responsible, they are giving out to community. Apparently they are making a lot of donation most of which are in bad faith. If you can ask yourselves, where were they all this time? why the sudden change as far as social responsibility is concerned? MACRA and CFTC you are very dull and stupid because you can not just let this happens to ordinary malawians. Malawians it begins with us!!!!!!!! we have talked now what remains are actions
The lack of service in the telecoms is really sickening; the dropped calls; “amene mukuwaimbira’o sakuyankha” lies when it’s the Telecoms problem; the lack of investment in infrastructure. Simply put, taking Malawians as complacent, and Malawi as powerless. Meanwhile, the oligarchs are raking the money in!
APM government has to act on this. Otherwise, the regulatory agencies should be accused of abating, and even participating in the collusion between the Telecoms; especially considering the degree of corruption in our country! What else are Malawians to think?
And these regulatory agencies pretending to have power; but all they seem to be are toothless dogs sitting on the laps of the Telecoms, and just licking the Telecom bosses’ faces for “scones”. Aasa!!! Zanndikwana!