Price wars could lead to market failure: MTN

MTN South Africa CEO, Zunaid Bulbulia has questioned the sustainability of the South African telecoms market amid increased price cuts.

Speaking at the MyBroadband 2013 conference in Midrand on Wednesday (9 October), Bulbulia suggested that constant pushing down of prices would lead to “market failure”.

Addressing the conference, Bulbulia said it’s clear that through ICT industry the lives of the people could be transformed and bridge the digital divide.

“Broadband connectivity contributes to economic growth and development, and every 10% incremental broadband penetration will result in a 1.38% point in GDP growth rate,” he said.

MTN noted that mobile broadband growth can assist the South African Government to reach its target of 100% voice penetration and Internet access and deliver on its 2020 Broadband for all strategy.

However, Bulbulia warned that these benefits do not come cheap, as the investment needed is immense and needs to be balanced with fair regulatory intervention.

“The industry is at a cross road, as regulatory intervention to bring prices down may have unintended consequences of creating an unsustainable environment that could force incumbent operators not to invest in broadband roll out,” he said.

He cautioned South Africa to follow the US option of less regulatory intervention and avoid the disastrous EU alternative of aggressive regulatory intervention on pricing.

He warned that in Europe, competition engineered through multi-licensing hasn’t worked and resulted in limiting investment and a number of operators ended up being bankrupt.

Many in precarious financial positions has resulted in the deployment of LTE infrastructures occurring at a slow pace.

“Market performance in the EU is being hampered by the inability of operators to exploit economies of scale and scope, thereby slowing network deployment, impeding innovation, and harming consumer welfare,” said Bulbulia.

However, in the US, less regulatory environment has resulted in a thriving market with high technology adoption, more infrastructure investments, and early and large blocks of LTE spectrum allocated, and most importantly welfare incentives for the consumer, MTN said.

“Which road will South Africa choose – less or aggressive regulatory intervention? We at MTN believe that investment is key to broadband access,” said Bulbulia.

“This will enable us to roll-out long-term evolution or LTE optimally and assist government to deliver on its 2030 Millennium Vision and also assure that broadband is no longer the exclusive purview of the few.”

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Price wars could lead to market failure: MTN