Tunisie Telecom in bid to lure new subscribers

Tunisie Telecom's "radical" restructuring of its mobile GSM tariffs in February represents a clear focus by the incumbent on enticing new subscriber additions, according to International Data Corp. (IDC).

"As expected, Tunisie Telecom lowered its prepaid activation fees in response to the lower activation fees of the new entrant, Tunisiana," commented Mohsen Malaki, senior analyst at IDC CEMA's telecommunications group.

"And to continue capitalising on the growth momentum in the prepaid market, Tunisie Telecom reduced its prepaid per minute fee."

The incumbent's per-12 second billing structure, from the first 12 seconds, is an aggressive move that has not yet been undertaken in the region, particularly this early on in the growth phase of a duopoly market.

"Many of the markets that have reached a relatively advanced level of penetration, and experienced price competition, have moved on to billing by the second after the first minute of use, but none have been so aggressive as to charge by the fraction of the first minute," added Malaki.

The reasoning for this has been that the majority of outgoing mobile calls are less than a minute in duration, implying a significant revenue loss for any operator charging by the fraction of the first minute.

Tunisie Telecom's competitive new prepaid price structure may be a fix for the operator's own internal ailments, as much as it may be a response to competition.

According to IDC, it is well known that Tunisie Telecom's contract GSM customers have long complained of billing problems by the operator.

First, its customers receive their bills every six months, creating a sticker-shock each time a customer receives a copy of the bill, while also increasing the likelihood of perceived billing errors by the customer.

Second, and equally as important, is the strain that a six-month billing interval places on Tunisie Telecom's cash flow and liquidity. Third, the incumbent suffers from a high frequency of late or unpaid bills.

Seen in this light, the new tariff structure is designed to entice new gross subscriber additions towards prepaid rather than contract, while also creating a churn of Tunisie Telecom's own contract subscribers to its prepaid plan.

"This should preserve Tunisie Telecom's market share and prevent churn of contract subscribers to the competitor, and thereby avoiding the negative impact of its poor billing system and cycle," the report added.

"The cannibalisation of the contract market by Tunisie Telecom will have a lingering effect on the balance between prepaid and contract in Tunisia over the next five years, as the new entrant, and eventually the incumbent, struggle to entice high-revenue prepaid customers, including many business customers, to switch to contract subscriptions."

IDC expects Tunisie Telecom to continue maintaining its market share leadership, even with the freezing of new subscriber additions during several months of 2002.

Tunisiana - the commercial name of Orascom Telecom Tunisie - will respond quickly to the new tariffs being offered by its competitor, and attempt to focus on the prepaid market for now, while gradually trying to identify and then entice high-revenue prepaid customers to opt for contracts.

"Both operators realise that the real revenue growth potential from a rapidly expanding subscriber base will not be in usage, but rather in activation fee revenue. Thus we do not expect a rapid deterioration of activation fees over the next two years."