Accra, Ghana, June 9, 2020//-The decision by Ghana’s government to intervene in the country’s telecoms market to ensure fair competition has been welcomed by development analyst.
Ms Charity Lankono, said: “The step to implement policies that boost competition in the Ghanaian telecommunication sector by the NCA is an important decision”.
The government through its National Communications Authority (NCA) on Monday, June 8, 2020 announced that would in the coming days begin the implementation of specific policies to ensure a level-playing field for all network operators within the telecommunications industry.
Ghana’s telecom market is being dominated by MTN with Vodafone, AirtelTigo and Glo Mobile as minor players. But the government is coming with the new policies to protect the minor players.
She explained: “While this is so, we need to be pragmatic about it. It is clear MTN Ghana has a very large market share of 75% which is quite interesting considering that it is not the only company in the telecommunication sector”.
However, having a large market share does not necessarily mean a firm has market power, Ms Lankono told African Eye Report in an interview.
Key questions
She raised some key questions such as: Does MTN Ghana have the power to raise prices high above the competitive level without being kicked out of the market by Vodafone and AirtelTigo?
Is MTN making a profit with the current prices in relation to their fixed cost not just their variable cost?
Also, have firms such as Vodafone made similar investments MTN has made and have they recovered their cost? Ms Lankono who is also the Research Assistant at CUTS International, questioned.
“Are there effective buyers that force MTN to reduce their prices such that having a large market share does not influence their profits? Answering these questions may give more insights on the issue at hand”.
If MTN has a high sunk cost resulting from undertaking an innovation (such as the MoMo), it is fair to say we do not need the NCA to intervene at least within the early years of operation because MTN needs to recover their sunk cost, according to her.
“Otherwise, they may feel reluctant to undertake future innovation. On the other hand, if we have statistical evidence that MTN has recovered their sunk cost and still has a larger market share to the extent that it gives them market power, then the NCA is doing the right thing”.
The issue is that basing on only their market share to say they have market power is quite problematic. We all know MTN brought Mobile Money (MoMo) to Ghana so the question to ask is, has MTN recovered their investment and risks?
NCA should be careful in order…
Also, the NCA should be careful in order not to encourage production inefficiencies. If MTN has a large market share simply because it is very efficient, implementing this so-called policy for level-play ground will promote production inefficiencies especially among the non-dominant firms, Ms Lankono admonished.
In effect, there should be further assessment of why MTN has a large market share and how it contributes to their abuse of their dominant position.
Furthermore, she thinks the NCA gives an asymmetrical interconnected rate in favour of disadvantaged operators need to be reconsidered.
This preferential treatment may distort competition and defeat the purpose of their intervention. If the NCA wants to boost competition, why do they want to favour other organisations? Ms Lankono asked.
Moreover, is the NCA a price regulator? Setting price ceiling and floors may be beyond their jurisdiction since Ghana currently has no competition law. Therefore, on what basis are they going to set those prices?
The way forward
For these abnormalities to be addressed, she called for the passage of the country’s competition law which is currently being worked on.
“If a competition law is in place, the other non-dominant firms can sue MTN for abusing their market power that is if they have one.
Also, the NCA per their definition of a firm having market power needs revision. As said early on, assessment of market power goes beyond having a large market share”.
Nonetheless, market share can be an indication of market power. Besides, having market power and exercising it are two different things.
There are firms having high market shares and market power but still making losses. That is quite surprising, but it does happen. Therefore, the definition of market power in the NCA laws should be re-examined.
African Eye Report
