When Mobile Prices Get Too Low
Tigo and Dialog CEOs. Photo by Dinidu de Alwis for LIRNEasia
Sri Lanka’s mobile prices may be too low for our own good. For example, a Dialog Blaster package costs a max of Rs. 3/minute for voice and Rs. 1 per SMS. By comparison an AT&T (US) plan is about Rs. 9 and a shocking Rs 20 per additional SMS. Unlimited messaging and data for $30 (Rs. 3,000), which is still as much as a yearly bill here. Prices may be so low, in fact, that it’s killing the industry.
Every mobile operator in Sri Lanka is now losing money. It began with Dialog taking a drubbing from its giddy heights, but now the government company Mobitel is losing, and taking down the fixed line SLT revenue with it. Tigo was sold, Airtel is losing, etc.
At a recent LIRNEasia (dad’s organization) forum the Dialog and Tigo CEOs were practically crying in pain and asking for what sounded like a bailout. The TRO (regulator) has responded to the issue by proposing an effective floor of 60 cents per minute on voice. This in hopes of off-setting the vicious price war and competition that has given Sri Lanka some of the lowest prices anywhere.
It is, in fact, entirely possible that our mobile service is too cheap and good. One of them has to give. Right now we have insanely good 3G coverage, enabling me to get broadband Internet from almost every dot on the map. That stuff, however, requires investment. If the carriers are losing money they won’t invest, and 4G is on the way.
Of course, every segment of the economy has taken a hit, but mobile was the golden goose. I personally think that something has to give price or tax wise if it’s going to lay any more golden eggs. Of course it is entirely possible that they were making obscene amounts of money, didn’t invest properly and deserve this decline. They were getting proper yelled at at the forum.
Market could have returned to normal if Tigo was bought out by one of the incumbents. But forget not one factor playing part – AT&T has 3 times higher rates and so does the American wages too.
All Telecom operators, both fixed and mobile are losing money.
The future for all wired or wireless providers is being a dumb pipe. They are being dragged into this future kicking and screaming. Read this brilliant post by Fake Steve Jobs last week http://www.fakesteve.net/2009/12/a-not-so-brief-chat-with-randall-stephenson-of-att.html