MTN Nigeria and Globacom Limited, two of the biggest players in the telecoms market, are to remain under regulatory sanctions over allegations they have used their market dominance to compete unfairly in the Nigerian market.
A top official of the Nigerian Communications Commission (NCC) told Technology Times exclusively at the weekend that the industry watchdog is yet to lift strict sanctions imposed on the two telecoms companies a few years ago following market dominance declarations by the industry regulator.
[su_quote cite=”Dr Eugene Juwah, Executive Vice Chairman/CEO, NCC”]”Another operator stated that the pricing of transmission cables to provide last mile data service is un-economical. The operator also stated that it had been subject to predatory pricing and a refusal to share infrastructure from other operators. The operator acknowledged that practices likely to cause substantial lessening of competition are often difficult to prove because an intention to eliminate the competition must be proven”[/su_quote]
Dr Eugene Juwah, the Executive Vice Chairman of NCC had in determination dated April 25, 2013 held that both telecoms companies, MTN Nigeria and Globacom are dominant operators in key segments of the nation’s telecoms market.
The NCC top official confirmed on condition of anonymity that the regulatory agency’s position is that the determinations still stand as they are yet to be reviewed after the 2013 study to assess actions and conducts by some operators that could reduce fair competition in the telecoms industry.
Explaining the grounds for determining an operator as a dominant player, NCC says “the Commission will presume that any Licensee whose gross revenues in a specific communications market exceed forty per cent (40%) of the total gross revenues of all Licensees in that market, is in a dominant position in that market.”
The telecoms regulator said it reviewed six relevant market segments of the Nigerian telecoms including mobile voice, fixed voice, fixed data, mobile data, upstream segment and downstream segments.
The study of the mobile voice covered the broad spectrum of mobile telephony including messaging and fixed line telephony.
On the other hand, study of the data segment covered fixed data, retail data, transmission services and leased lines as well as mobile data for example, dongles / data cards / tablets, Internet through mobile phone connections e.g. 3G / GPRS / Edge, NCC said.
Upstream market segment reviewed included Spectrum, Tower Sites, Network Equipment, Wholesale Broadband/ Internet Access and Wholesale Leased Lines and Transmission Capacity.
The Downstream segments review focused on Handsets / Devices (including the Device Operating System) and Applications / Content (including m-Commerce)
Following the outcome of the review, NCC announced that the two companies wield significant market might reduced effective competition in two key segments: mobile voice and upstream segments.
In the case of MTN Nigeria, the telecoms regulator claimed that the mobile phone company held dominant positions in two key segments: mobile voice and upstream.
On the other hand, Globacom and MTN Nigeria were designated as jointly holding dominant positions in the upstream segment of the Nigerian telecoms market where they NCC claimed they dominated the wholesale leased lines and transmission capacity sub-segments of the market segment.
According to Juwah at the time, no dominant operator was designated in the other four market segments as mobile data was found to be “effectively competitive” while fixed voice market “is in a decline.”
The determination, which took effect from May 1, 2013 will “remain valid and binding on licensees for the services specified in relevant market segments of this section, until further reviewed by the Commission”, Juwah had said at the time when he also justified steps taken by the telecoms regulator.
“As part of the process for assessing the level of competition in the Nigerian telecommunications industry, the NCC held one‐on‐one consultation meetings with several key stakeholders including all the major operators in the industry. Several complaints and issues as well as allegations were leveled by several companies as acts which are likely to substantially lessen competition. The acts that had empirical data and information supporting these behaviors were taken into consideration while determining acts which constitute practices likely to substantially lessen competition”, Juwah said in the determination.[su_quote cite=”Dr Eugene Juwah, Executive Vice Chairman/CEO, NCC”]Explaining the grounds for determining an operator as a dominant player, NCC says “the Commission will presume that any Licensee whose gross revenues in a specific communications market exceed forty per cent (40%) of the total gross revenues of all Licensees in that market, is in a dominant position in that market.”[/su_quote]
The telecoms regulator said it went the way of imposing the determination obligation as it allegedly received complaints and comments on actions and conducts perceived to “substantially lessen competition in the industry” with NCC alleging that:
One operator noted that some CDMA operators do not comply with the terms of the Interconnect Agreements and owe substantial amounts to GSM Operators as interconnect debts;
It was also mentioned that customers are solicited via SMS and phone calls by rival operators
Another operator stated that the pricing of transmission cables to provide last mile data service is un-economical. The operator also stated that it had been subject to predatory pricing and a refusal to share infrastructure from other operators. The operator acknowledged that practices likely to cause substantial lessening of competition are often difficult to prove because an intention to eliminate the competition must be proven
Another operator also stated that excessive pricing of wholesale leased lines, onerous contractual terms, refusal to supply any wholesale capacity on certain routes, refusal to offer dark fibre access and refusal to provide access to duct sharing services are some of the practices likely to substantially lessen competition it has faced in the industry.
Following the market analysis and review, NCC announced its key findings as follows:
Key Findings in the Mobile Voice Market:
The mobile voice market is not effectively competitive and is still highly concentrated with an HHI of 3063. MTN has a 44% market share of subscribers within this market. There is also a wide differential (of about 300%) between on‐net and off‐net calls and this is indicative of the likely establishment of a calling club for MTN subscribers.
Key Findings in the Fixed Voice Market:
Though Starcomms (with about 33% market share of subscribers) has the highest market share within the fixed voice market, it is not considered to have significant market power in this market as it has consistently lost market share over the past three years. The fixed voice market has been in decline since 2008 and has lost 70% of its market over that period.
Key Findings in the Mobile Data Market:
The mobile data market segment has grown significantly in the last five years and accounts for about 99% of the total data market. The GSM Operators lead this market segment. The major competition concern is that the wholesale providers of bulk bandwidth also play in the retail mobile data market and potentially stifle competition in this market. The study, however, concluded that no operator is dominant within the mobile data market.
Key Findings in the Fixed Data Market:
Fixed line broadband access is severely limited and accounts for about 1% of the total data subscription. Before the advent of mobile Internet services, the available Internet Service Providers (ISPs) utilised the fixed wireless data solutions but such ISPs are fast going out of business due to their inability to compete directly with the suppliers of wholesale data access. The study concludes that it is doubtful that the segment will achieve effective competition with the current issues encountered in the upstream supply segment.
Key Findings in the Upstream Market:
MTN and Glo jointly control about 62% of the public terrestrial transmission infrastructure which is a bottleneck resource in the provision of voice and data services. There are concerns that operators playing in the wholesale and retail sub-segments of these markets have the leverage to “squeeze” the margins of their competitors who are also their customers.
Following the determination as a dominant operator for mobile voice, NCC placed three key obligations on MTN Nigeria including Accounting Separation in which “the Commission will immediately enforce and implement Accounting Separation on the dominant operator.”
Also, the company is to collapse its On‐net and Off‐net retail tariffs. The regulator says that, “the differential between the on–net and off net retail tariffs will be immediately collapsed. The tariff for on‐net and off‐net will be the same, and subject to periodic review.”
Also, MTN Nigeria will henceforth be required to submit details of its operations.
Under this requirement, “the Commission may require the dominant operator to submit details on specific aspects of its operations from time to time as the need arises.”
On the other hand, Globacom and MTN Nigeria, which were jointly designated dominant operators for wholesale leased lines and transmission capacity also came under three key regulatory obligations which include the following:
Price cap/Price floor: The Commission will come up with a price cap for wholesale services and price floor for retail services, and subject to periodic review.
Accounting Separation: The Commission will immediately enforce and implement Accounting Separation on the joint dominant operators.
Submission of Required Details: The Commission may require any of the joint dominant operators to submit details on specific aspects of its operations from time to time as the need arises.
Juwah had said at the time that it was not the first time that NCC was assessing the competition levels in the Nigerian telecoms market as a similar study was carried out in 2010.
“Prior to this, the Commission had carried out a Determination of Dominance in 2010 which considered two markets, namely the mobile telephony market and International Internet Connectivity (IIC) market. The purpose of the Consultation was to assist the Commission in determining whether certain telecommunications service providers were in a position of market dominance in selected telecommunications industry markets in Nigeria within the meaning of the Nigerian Communications Act 2003.”
[su_quote cite=”Dr Eugene Juwah, Executive Vice Chairman/CEO, NCC”]MTN and Glo jointly control about 62% of the public terrestrial transmission infrastructure which is a bottleneck resource in the provision of voice and data services. There are concerns that operators playing in the wholesale and retail sub-segments of these markets have the leverage to “squeeze” the margins of their competitors who are also their customers.[/su_quote]