EcoCash tariffs reduced slightly. Who’s benefiting from this move though?

   

You probably saw it in a couple of adverts yesterday; EcoCash tariffs have been reduced. Not that the advert said it explicitly, it just listed tariffs effective 1 February 2014.These are only slight reductions, something that probably explains why this wasn’t promoted extensively.

The new tariffs are in the table below.

Amount($US)Send to registered subscriber ($)Send to Unregistered subscriber ($)Cash-Out Tariff ($)
1.00 - 1.990.14N/AN/A
2.00 - 5.000.140.540.20
5.01 - 10.000.240.740.30
10.01 - 20.000.441.340.60
20.01 - 30.000.621.840.90
30.01 - 40.000.822.341.20
40.01 - 50.001.033.541.50
50.01 - 60.001.454.542.00
60.01 - 75.001.525.042.30
75.01 - 100.001.987.003.00
101.01 - 150.002.488.503.50
150.00 - 200.002.989.603.90
201.00 - 300.003.7911.004.85
301.00 - 400.003.9513.054.90
400.01 - 500.003.9814.044.95

The adjustments have largely been 2 cent reductions in higher value bands. At face-value, this is a “sacrifice” from Econet because there will be an aggregated reduction in revenue for the mobile money service which, like any other operator in this field, relies on razor-thin profit margins from transactions that add up to significant volumes with a lot of traffic.

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But for the average Joe who wants to “EcoCash” $50 to another subscriber, the truth is such a minor adjustment will be hardly noticeable. To pass on a significant discount to its subscribers, EcoCash would have to make a massive reduction of its tariffs just like how Telecash zero-rated transfers between subscribers registered for its service.

Is this minor reduction EcoCash’s response to the demands of a price sensitive market?  As the market leader with a 4 million subscriber total and a handle of over $4 billion in transactions since its inception, this could be part of a strategy to maintain this momentum.

I think, however, that this looks like an attempt to pacify industry regulators with a reduction that can help build a defense against tough tariff reductions.

There has been sentiment that mobile money tariffs are still steep with the Minister of Industry and Commerce mentioning how the Competition and Tariffs Commission has been tasked with investigating these tariffs. The last time the regulator forced an adjustment of tariffs the mobile money service providers had to effect a 34% reduction.

With a tougher economic environment and a challenging telecoms landscape, players like Econet need to do all they can to avoid anything similar to this happening again in 2015.

Mobile money has turned into a strong contributor to the profitability efforts of Econet, Telecel and NetOne and anything that eats into that has to be avoided, even if it means effecting a slight voluntary tariff reduction.


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