Topic: Effects of competition in the Telecoms Industry.

By: Solomon Ojeagbase

ABSTRACT:

Telecommunications using a comprehensive framework, I examine the impact of competition in the telecommunications sector. Privatization contributed substantially to labour shedding, output growth, network expansion, and improvements in labor productivity as well as total factor productivity. But how countries privatized is important. Share issue privatization facilitated the development of the mobile market segment. Granting a newly privatized operator a period of exclusive market access, on the other hand, reduced the gains from privatization (due to the output-restricting tendency associated with market power) but not entirely negated the gains.

The presence of competitive pressure in the market was associated with more employment, higher output, faster network expansion, and higher labor and total factor productivity. We find evidence of complementarity between privatization and competition in that competition increased the gains from privatization and vice versa. Estimates show that half of the output growth between 1990 and 1998 was attributable to privatization and competition after controlling for input growth. Competition appeared to have a larger impact on labor and total factor productivity than privatization.

INTRODUCTION:

EFFECTS OF COMPETITION IN TELECOMMUNICATION INDUSTRY

Telecommunication can be defined as the branch of electrical engineering concerned with the technology of electronic communication at a distance, subsequently Telecommunication can also be defined as the system used in transmitting messages over a distance electronically.

Telecommunication will be the driving force of development in the second half of the 21st Century which has already seen an astronomical growth rate in revenue and job creation in different facets of the industry, not to mention the fact that telecommunications will be the 2nd largest industry after petroleum sector in the 21st century raking in more than 400 trillion in profits.

In Nigeria wireless telecommunication services was introduced in 1999, under the former President Olusegun Obasanjo. National carriers were privatized, new competitors licensed, and new services allowed. This service came at a time when people were in dire need of communication, citizens all over the Country were tired and battered by the then defunct NITEL which took customers on a ride and made them wait in long queues just to pay for reconnection of their phone lines. This messy experience became a thing of the past as 2 major phone company operators stormed the nation one from South Africa and the other was locally owned the former was MTN and the Latter Econet. It is also imperative to mention that CDMA networks which were also wireless but did not use handsets but desktops were already in use before the introduction of mobile phones in Nigeria, phones like Starcomms was widely used in place of Nitel lines.

Competition in the telecoms industry cannot be over emphasized as there were more and more people embracing the good fortune of the land, although this service was very expensive and a lot of people could not afford the lines which were sold for #40,000 per line. People were happy to buy as this solved the problematic nature of NITEL. Subsequently more and more lines were introduced into the market not to mention the companies were making a staggering profit of up to #1billion in their first year of introduction into the market.

By Late 2007, we have seen over 5 mobile communication Companies springing up in Nigeria in a bid to share from the huge profits which the mobile networks were making. Companies like Visafone, Celtel, Etisalat, Globacom, Vee mobile and Multilinks were already making way for what will become an intense battle for survival in the Large Nigerian telecommunications market. Companies like Econet went to change their name 4 times from Vodafone to Celtel then finally Airtel.

Competition in the telecoms industry has made way for better services, lower tariffs and internet facilities which enabled people further communicate cheaper than what is expected when you make a phone call. This has also reduced radically the prices for the product, as a SIM card can be bought for just about a British Pound sterling which is ridiculously cheap and has made connectivity to loved ones cheaper. This service has also brought about more options to its customers, as one is trying to outdo the other more and more services to entice customers to keep patronizing their product.

Competition in the Telecoms industry has brought about the creation of jobs for jobless citizens in the Country which has reduced the rate of unemployment. Also this has brought about the need for better business practices and more efficient ways to manage resources be it human capital or technological diversity. It has also helped to expand the economy and made the citizens more technologically savvy as they need to communicate well and manage their handsets themselves without the need of any experts.

Subsequently competition has banished the age old monopoly which makes the service providers decide the path of their product hence, making it monotonous to operate a proper service. This has been drastically shut out of the system as more and more service providers are beginning to realize the importance of the customers hence a customer oriented service has evolved from this ethical rivalry between telecoms service operators.

In conclusion competition in the telecommunication industry is not a bed of roses and there are some pitfalls on the road to redemption. Examples are black listing; fraudulent acts by unhealthy rivalry to the detriment of another company, setting traps and pin pointing loop holes in the services of a fellow compatriot in the business. But putting it on a scale of a 100, competition in the telecoms industry has improved lives by 70%.