Cross-group tariffs: good PR but not much else

OvumPrior to 2006, roaming used to be a convoluted process – at least that’s what operators claimed. And they could charge as much as they wanted. When the EU began to ask for lower rates, operators retorted that roaming was expensive to administer and difficult to implement. Then Zain (formerly Celtel) came along with its One Network concept.
 
It removed roaming charges for its customers across Africa, demystified roaming and earned a resounding endorsement from The Economist. The citation read: “ Zain Group has in effect created a unified market of the kind that regulators can only dream about in Europe.”

So why have cross-group tariffs not taken off en masse? Apart from Vodafone, 3, Zain, MTN, Cable & Wireless and Globacom, operators are not falling over themselves to offer cross-group tariffs. In our report we explored the market for cross-group tariffs, probing deep into the reasons for rolling out such a tariff.

Solid benefits
Cross-group tariffs have immense PR value. Customers love the idea of an altruistic company and, in the face of a recession, every little helps, especially for business customers seeking to lower costs. Such brand appeal can translate to a competitive advantage as it helps operators to attract and retain customers.

In addition, cross-group tariffs can be used to achieve specific strategic objectives. 3’s Like Home scheme was in tune with the operator’s strategic positioning as a market disruptor. Likewise, Zain, especially with its latest commitment on mobile data as part of its One Network, wants to gain moral advantage over MTN and Vodacom. In a way too, cross-group tariffs lend credence to all the talk about ‘synergies’ whenever one operator acquires the other.

Greater risks
The risks from cross-group tariffs are more worrying than the benefits. Firstly, there is the small matter of operational challenges. Is connectivity guaranteed? Has the operator deployed Customised Applications for Mobile networks Enhanced Logic (CAMEL) for prepaid roaming? Who deals with the customer services requests and disputes? And in which language?

Then there is the issue of money. We haven’t seen an operator that improves its revenues by offering cross-group tariffs, rather we see operators putting their roaming revenues at risk. It also exposes the difference in prices across an operator’s footprint and shows, for instance, why Zain excludes Kuwait from the One Network.

Crucially, as operators continue to argue that roaming is costly to implement, cross-group tariffs show the EU and other regulators that roaming is not difficult. This gives the EC and other regulators lots of ammunition: it’s contradictory to argue against reduced roaming charges, vociferously, on one continent (Europe) and do away with them altogether, voluntarily, on another (Africa).

Finally, there is a problem with assumptions about traffic trends. For example, there is little roaming between Burkina Faso and Tanzania, so Zain’s cross-group tariff is hardly ever used.

Cross-group tariffs don’t amount to much
Anecdotal evidence shows us that cross-group tariffs do not bring much benefit to consumers or operators. 3 is scrapping its Like Home tariff in June.
 
Even in Africa, where Zain’s One Network is a moral champion, MTN continues to vacillate on launching its Seamless Roaming, which is not surprising: the more we probed, the less convinced we were too.

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