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Price war rages in Dar’s 10m plus mobile market

Discussion in 'Biashara, Uchumi na Ujasiriamali' started by BAK, Dec 14, 2008.

  1. BAK

    BAK JF-Expert Member

    Dec 14, 2008
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    Price war rages in Dar’s 10m plus mobile market


    Posted Friday, December 12 2008 at 15:39

    A fierce battle for the lucrative mobile phone market in Tanzania is benefiting consumers as service providers lower their tariffs.

    The four mobile service providers — Tigo, Zantel, Zain and Vodacom — have in recent weeks been engaged in call promotions that have been lasting from 6pm to 6am.

    Callers now enjoy a reduced promotional incentive rate of an average of Tsh1,500 ($1.15) for 12 hours within the same network.

    This means that with cheaper sim cards, which cost about Tsh500 ($0.38), one can subscribe to three networks targeting cheap calls from the service providers.

    Normal tariffs charged by the four companies range from Tsh318 ($0.24) per minute during peak hours to Tsh72 ($ 0.06) during off peak hours.

    According to the Tanzania Communication Regulatory Authority (TCRA), as of June this year, the mobile phone market had 10,428,043 subscribers.

    Tigo, whose market share according to TCRA is 16 per cent, was the first to offer a 12-hour promotional drive several months ago through its “Extreme Calls” and “Extreme SMS” promotional incentives.

    Callers subscribing to the “extreme” service are deducted Tsh1,500 ($1.15), after which they make unlimited calls any time from 6pm to 6am. The “extreme sms” is similaly subject to an upfront payment of Tsh500 ($0.38).

    The normal non-promotional rates for Tigo range between Tsh216 ($0.17) during peak hours and Tsh72 ($0.06) during off-peak hours.

    Zain, which has a market share of 27 per cent, and Vodacom, which enjoys a significant market share of 43 per cent, through their “Jirushe” and “Chizika” promotions respectively, target voice service with subscribers paying Tsh1500 ($1.15).

    Zantel, which until recently was charging its subscribers Tsh2,500 ($1.92) for 24 hours under its “Babkubwa” callers’ incentive, has been forced to reduce the rate to Tsh1,500 ($1.15) for the same duration to keep pace with its competitors. Zantel has a 10 per cent market share.

    Between July 2007 and June 2008, mobile phone companies had paid excise duty amounting to Tsh40.2 billion ($36.2 million) against the government’s target of Tsh39.2 billion ($33.8 million).

    Tanzanian is among the most competitive mobile phone markets on the continent alongside Nigeria, Zambia, the Democratic Republic of the Congo, Kenya, Algeria, Tunisia, Ghana and South Africa.

    Africa is the fastest growing mobile phone market in the world, according to available statistics.

    In the opening quarter of 2008, mobile phone users in the continent exceeded 280 million, overtaking the United States and Canada, which together have 277 million users.

    They suspect that the current promotions are meant to deny the government a sizeable tax amount.

    Mr Placidus Luoga, Deputy Commissioner General of Tanzania Revenue Authority, denies the possibility of any operator avoiding paying taxes.

    Mr Luoga said recently that indeed, mobile firms in Tanzania have been paying up taxes above the target set by TRA.

    Between July 2007 to June 2008 for instance, mobile phones had paid excise duty to the government amounting to Tsh40.2 billion ($36.2 million) whereas the TRA target was to collect Tsh 39.2 billion ($33.8 million) a performance of 102 per cent.

    These are the firms in Large Tax payers’ category, which includes mobile phones operators such as Vodacom Tanzania, Tigo, Zain and Zantel.

    The TRA said that the Value Added Tax (VAT) for all telecommunication forms, including the fixed line ones, had amounted to Tsh 105.5 billion ($90.9 million), against the targeted Tsh 81.8 billion ($70.5 million), a performance of 129 per cent.

    “But as there is a problem with the income tax law which provides for an avenue to minimize tax to be paid,” he said adding that TRA is moving to check in how the taxpayer have reached the tax to be paid.

    However, he said since tax avoidance is legal, TRA is currently studying a prudent mechanism that would compel its taxpayers into paying a fair tax amount. “What is illegal is tax evasion, which we are increasing our capacity to fight it.”

    But critics say Tanzania has the highest rate of tax when it comes to mobile phones, and already alarms are on that the rates are too high that they actually add to poverty levels to average users instead of adding value.

    With effect from July this year, the government raised excise duty for airtime of mobile phones from 7 to 10 per cent.

    Mr. Mustafa Mkullo, Minister for Finance and Economic Affairs said when presenting a national budget recently that mobile phone tax has been increased to adjust for inflation changes that now stands at 9.5 per cent.