Liberia Orange, MTN fight regulator on mobile price hikesOctober 11, 2020
Liberia, one of Africa’s smallest economies, has seen a rapid growth in mobile users over the last decade, but its regulators are stuck in an ongoing pricing battle with two of the region’s largest telecoms companies in the world.
French giant Orange and Lonestar Cell MTN, a subsidiary of South Africa’s MTN Group have told consumers they are increasing prices because of a new order which imposes additional surcharges of $0.008 for each minute of voice calls and $0.0065 on each megabyte of data.
Under the new plan, a $1 recharge card is worth 15 minutes of voice calls, down from 45 mins. And $2 will buy 600 megabytes on internet data down from 1.2 gigabytes.
In response, the state regulator, Liberia Telecommunication Authority, said on Oct. 8 the mobile companies were engaging in illegal price-fixing and collusion . It gave the network companies 12 hours to rescind their new prices which they did not.
The regulator argues the price floors established in 2019 gave the network companies a windfall of $104 million in extra revenue. And that the new prices are designed for additional profiteering.
French giant Orange and Lonestar Cell MTN, a subsidiary of South Africa’s MTN Group have been in a long-running battle with the Liberia Telecommunications Authority over charges which are aimed at increasing competitiveness and in turn bring stability to the market.
Over the years, the two companies have become a dominant duopoly providing voice calls and data at cheap prices, thus effectively pricing competitors like Novafone out of the market. Novafone was later bought by Lonestar-MTN.
The mobile network companies are fighting to lower their prices arguing that ordinary Liberians cannot afford a price regime which increases the average phone user’s costs by as much as 100%.
In February 2019, the regulator issued an order which set floor prices and imposed additional surcharges.
In September, the Liberian supreme court ruled against Orange in its case against the regulator, challenging the implementation of the surcharges. The mobile network companies have gone as far as threatening to pull out of Liberia altogether saying the surcharge “would mean at best a drastic reduction in our investments and downsizing of our operations and at worst, a conclusion by our parent companies that our business is not sustainable in Liberia”.
But at stake for the Liberian government is millions of dollars in corporate tax revenue, with the local telcos being two of the biggest taxpayers in the country. With a GDP of just over $3 billion, Liberia is taking on telecoms giants Orange and MTN who have market caps of $28.6 billion and $6 billion respectively.
Liberia’s economy, which is still recovering from 2013/14’s devastating Ebola epidemic, has now been upended by the fallout from the global Covid-19 pandemic. In 2019 the gross national income per capita of Liberia was just $580 and more than half the population lives below the poverty line. The increase in cost of voice calls would substantially affect Liberians access to a stable means of communications.
Additionally, the increase in data cost would most likely lead to a reduction in access to the internet. According to the Alliance for affordable internet, Liberia ranks 56 out of 61 countries globally on the affordability of internet. This ranking is based on cost of data as relation to average monthly income.
Through the 2016 to 2019 fiscal years, both phone companies have two of Liberia’s biggest corporate taxpayers. A downsizing of their operations could have repercussions for the economy.
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