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The East African : Sep 26th 2015
34 The EastAfrican BUSINESS SEPTEMBER 26 - OCTOBER 2, 2015 Flat fees and bundled o≠e≥s fast ≥eplacing individual sale of voice, SMS and data I n ancient times, there were tribes that practised cannibalism, eating their enemies after defeating them in battle. In recent times, there have been horror stories of plane crash survivors eating the dead among the passengers to stay alive. East African telecommu- nication and Internet providers find themselves in a tight spot, where they have to consider cannibalism: “Should I eat my own business? Should I charge flat fees by billing a fixed price per month or day, and provide unlimited voice, SMS and data usage and give up the more lucrative revenues of voice per second, SMS per message and data per megabyte?” The answer for most of them is a resounding yes. Charging a flat fee is a disruptive trend that cannot be neglected by any provider. The question is not if but when to go down this route. Irrespective of the timing, East African providers will not be the first. If we look at developed markets such as Europe, flat fees have been a common feature for years. In the European market we have seen an extremely unsettling change from fixed (analog) calling to Internet calling (voice over IP). The average monthly calling bills of, say, $60, shrank to less than $15 in no time. Fixed line telephone providers were chal- COMMENTARY ERIK VAN DER DUSSEN AND MBAGARA KARITA “The popularity of bundled services and the rate at which different offers are being churned out and tweaked tells us that it is here to stay.” lenged to stay or exit. Staying meant more short term revenues on analog calling, but losing market share in the mid-term. So the timing of their exits was crucial. This was the first time operators had to cannibalise revenues in order to gain or maintain market share, of a market that suddenly had lower revenues though. It is exactly the same thing that is about to happen in East Africa. Mixed offer Nearly all operators in East Africa have a mix of offers that bill on usage and others that charge a flat fee. Airtel offers the unlimiNET proposition. This offers bundled voice, SMS and data in a period ranging from daily to monthly bundles. MTN Uganda has “Freedom” bundles while in Tanzania, Vodacom has “Cheka Bombastik.” Safaricom has “Advantage Plus,” which offers the same bundles to post-pay customers. The traditional business model of selling voice, SMS and data as individual services is on its way out. The popularity of bundled services and the rate at which different offers are being churned out and tweaked tells us that it is here to stay. So telecommunications providers should go into innovative business models as fast as possible. It’s urgent; the conventional “voice” will be swallowed up soon. In fact, the unavoidable cannibalisation by flat fees (eat as much as you can), gets even worse. The consumer uptake will be accelerated by the attractive data-component, with unlimited access to WhatsApp, Facebook, Gmail, Twitter and Instagram. These over-the-top (OTT) service providers are already adding conventional calling and text messaging to their offering and are a direct competitor for mobile phone operators. In January, WhatsApp, the world’s most popular instant messaging service, an- nounced that it had over 700 million monthly active users sending 30 billion messages daily. The number of SMS sent over the same period was just over 20 billion and they were on a gradual decline. Nine months later, WhatsApp has added an extra 200 million monthly active users and calling functionality to their app. The issue is evidently a threat to the extent that the CEO of one of the region’s leading telco providers suggested that OTT providers need to be regulated as they utilise and profit from the infrastructure put in place by mobile network operators. Having observed the dy- namic market movement in the recent past, it is difficult to predict whether a provider will have the same feeling in three years, when their market share will have materialised into revenue growth by offering new services such as music streaming and IPTV. In the region, large seg- ments of mobile customers have or are about to move to smartphones. Predictability in pricing will provide sufficient reassurance, especially to new smartphone users, to try out mobile data services. E≥ik van de≥ Dussen is associate di≥ecto≥ while Mbaga≥a Ka≥ita is business development manage≥ at Deloitte East Af≥ica Imported sugar at Kisumu. Picture: File EAC pa≥tne≥ states to cha≥ge 1pc CIF on impo≥ted goods By CHRISTABEL LIGAMI Special Correspondent THE COST of importing goods into the East African Community through the Single Customs Territory (SCT) will go down under a new, reduced import insurance rate. Under the amended EAC Customs Management Act 2010, all partner states will charge a cost insurance freight rate of one per cent on all imported goods under SCT, down from the initial 1.5 per cent and above. “For purposes of com- puting the Customs value, where no insurance is ascertainable, the price paid is to be increased by the national charge for insurance, which should be taken as 1 per cent of CIF for imported goods,” said the EAC ministers. The EAC partner states charge different import declaration fees. In Kenya, it is 2.25 per cent of the CIF value; in Rwanda it is 5 per cent and Uganda 6 per cent. The East African Leg- islative Assembly recently adopted an amendment to the EAC Customs Management Act that will enable persons intending to import goods to write to the commissioner for advance Nearly all operators have a mix of offers that bill on usage and others that charge a flat fee.” The Customs valuation should be based on the actual price of the goods being imported.” Gilbert Langat, CEO, Kenya Shippers Council rulings on either tariff classification, rules of origin or Customs valuation. In the past, EAC import- ers and revenue authorities have disagreed on the tariff code under which an item should be classified and the Customs value that an item should be accorded. Import insurance rate “The Customs valuation should be based on the actual price of the goods being imported, which is indicated on the invoice, especially on goods like cars,” said Kenya Shippers Council chief executive Gilbert Langat. Mr Langat said that the newly harmonised import insurance rate will discourage dumping. Under SCTt, the EAC member states will adopt a destination model of goods clearance, where assessment and collection of revenue will be done at the first point of entry. According to a report by the EAC Secretariat released early this month, only Tanzani and Kenya have fully rolled out the SCT maritime imports and transfer procedures. Rwanda has rolled out all SCT procedures on all goods except exports while Uganda has rolled out the SCT maritime and transfers procedures on a select number of goods. Rwanda is the only coun- try using the Regional Customs Transit Guarantee system (RCTG) as a regional bond. Other partner states are still using national bonds for movement of warehousing or transit goods within and through the Community.
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