Lagos — In this report Okechukwu Kanu examines the costs of making GSM calls and draws conclusions on when the prepaid subscriber will begin to benefit from falling costs

When will call tariffs fall? If you had asked this question before 2005 and you wanted to ask it again today, the question would now probably sound this way:

"When will call tariffs for the individual (pre paid) user fall?"

Call rates have crashed to as low as N15 per minute since the clamour for reduction in the prohibitive tariffs the GSM networks began with at the take-off of business. Subscribers used to pay N50 per minute then, today, local calls can be made at anything from N25 per minute to N15 per minute. But this is at commercial phone centres or on some of the new post-paid packages.

Tariffs at the commercial phone centres crashed fast and hard once the battle for the nerve of this lucrative portion of business began in earnest in 2004. For almost three years MTN's Boostercard had reigned supreme. Having created the market it became its sole beneficiary. However, once Bumpa Card for Vmobile and ProfitMax for Glo Mobile fully came on stream MTN's Boostercard had to fight doggedly to maintain its stranglehold on the market. The result has been continuous tariff reductions and innovations in that market. If there is one department of the GSM companies where everybody constantly has his thinking cap on it probably would be the department overseeing products roll out for the commercial phone centres. Following the recent trends in that market will give you an insight.

Commercial phone centres or call centres began to gain popularity at the height of the cry by subscribers for GSM tariff reduction. Call rates were at the unpopular N50 per minute level and MTN read in the situation an avenue for more gains. It introduced what it called Boostercard, an innovation that allowed high volume callers on the prepaid platform to make cheaper calls if they paid a monthly rental. Bumpa Card, Vmobile's response to MTN's BoosterCard was launched in June 2004 almost three years after MTN's boostercard, and it started with a monthly rental of N3,000, which reduced call tariffs to N22 per minute and 40 kobo per second. Glo then launched ProfitMax for the commercial phone operators. Available for N4,999, it came with N500 (later N1,000) free airtime and a monthly rental of N2,500. Outgoing calls to any phone within Nigeria is charged at N21 per minute and N7,500 is credited to the account of subscribers who use up to N20,000 airtime and above within a calendar month. Call centre operators responded. They reduced their call rates going for N30 per minute at the time, to N25 and N20 per minute.

Glo's discounts inspired Vmobile to introduce its own variation of discounts. Subscribers were suddenly allowed N5,000 airtime credit whenever they loaded up to N50,000 recharge and 5 percent when then loaded up to N10,000 credit. This move was a further incentive for commercial phone operators to stick with Vmobile's Bumpa card and they did. Recognising that this market was gradually slipping from its grasp, MTN, which had calls within its network going for N22 per minute and calls to other networks going for N24 per minute, reduced rates to N19 per minute for calls within the network and N23 per minute for calls to other networks. Having enjoyed the fruits of the lucrative market for a short while, Vmobile was not about to let it go. It quickly introduced 'Four faces of Bumpa Card' (N9,000, N6,000, N3,000 and N1,000 denominations). What this introduction did was shift the nature of the competitive battle from one front to several. Also, for the first time, these call rates-reducing products lost their elitist tang. The N1,000 Bumpa Card had its target as students. N1,000 was a cost students long on talk could afford to pay to lower their calls a bit.

Now MTN was brought in a new tinge to the whole nature of the competition. The Daily Boostercard dramatically changes the nature of the competition. It overhauls it. What the daily booster does is that, it for the first time, gives the subscriber choice of what days he wants to pay the booster charge for reduction on his call rates. He pays an extra charge (of N150) only on days when he chooses to make really long calls. And this costs him N19 per minute/ 38k per second within the network and N23 per minute/45k per second to other networks.

On the regular monthly booster the subscriber's N2,500 charge had covered even days when his calls are short and few. Now he pays extra only for days (daily booster days) he chooses to be long on talk.

The Daily Boostercard could be said to be the first customer friendly MTN product. The customer feels that he has a good deal at the same time as it makes money for MTN.

This product makes the student as well as the non-elite happy. He has privacy while he makes his calls at reduced rates. But it is not a gift from MTN, it also makes MTN happy with increased revenue. Here is how it works.

In a month of 30 days, going on MTN Daily Boostercard every day (N150 X 30 days) would cost the customer N4,500, N2000 more than the normal cost of the monthly boostercard. If you use the daily booster on more than 16 occasions within the month then you would be worse off in terms off expenses than those on the N2,500 monthly MTN boostercard.

When you load a N1,500 MTN recharge card and activate the N150 Daily Boostercard, you are left with N1,350, with which to make calls for as low as N19 per minute. This gives about 71 minutes of talk time (within a 24-hour period). Without the Daily Boostercard, MTN to MTN calls are at N39 per minute. This gives the prepaid subscriber just over 38 minutes of talk time. It means that within a 24-hour period those on the daily boostercard gain about half an hour of extra talk time, over the subscriber who has not loaded the MTN Daily Boostercard.

A subtle response has come from Vmobile since the Daily Boostercard's introduction. A new Bumpa Card promo will give an extra Bumpa card to customers loading up to six Bumpa Cards. The new Vmobile Bumpa Card promo is an attempt to build up customer loyalty for the brand. Customers loading up to six Bumpa Cards are given the seventh Bumpa Card free of charge. With one Bumpa card having a life span of one month, six purchases keeps the winners tied to the network for seven months. The extra Bumpa Card offer assumes that there will be no better deal from the other networks within the seven months period. However, as it stands, on any month that a better deal occurs on the other networks they will shift away from Bumpa Card, the market's nature being to go for the best available call reduction scheme.

Never one to be silent for too long, Glo's silence in this area in the last couple of months might be an indication that it might be coming up soon with its own innovation to keep the market in its favour.

There is no doubt that so many dynamics are at play now in this market. Prior to the MTN Daily Boostercard's introduction the networks had sought market advantage through cuts in either the monthly rental or the call per minute rates. The MTN Daily Boostercard however seeks its own advantage through 'period or time'. Interestingly enough, the introduction of the MTN Daily Boostercard effectively kills off one of its own prodcts, the already moribund MTN Flexi, which is supposed to drop calls to lower and lower rates as the subscriber stays long on talk. Might it also take away some of the patronage of the commercial phone operators, since individuals can now afford lower call rates from the privacy of their own handsets? This is another question. Not necessarily it seems. Unless the caller makes calls probably up to N300 (N150 as cost of the daily booster plus cost of his call) it still costs him less to give patronage to the commercial phone operator.

More than these cost savings the real deal here is that the battle for the heart of the commercial phone operators is turning to be the driving force for the eventual reduction in call rates that the individual GSM subscriber has so cherished for long.

We can see it when we ask questions. What if another of the networks, perhaps Glo, introduces its own version of the daily boostercard which perhaps costs N100 to activate. Vmobile might be challenged to then introduce one that would cost N50 to activate. Eventually the costs could then be scraped and subscribers would be left only with their reduced calls per minute.

How long this will take to happen? There is no doubt that for the prepaid subscriber, calls per minute will definitely fall in 2005. If by any means it happens within the next six months do not fail to notice that it came from the keen competition arising from the battle to win the heart of the commercial phone operator.