Since the introduction of a second mobile network operator (MNO) to the Bahamian market in 2016, total mobile connections increased by more than 14 percent between 2016 and 2020, representing an increase from 365,840 to 417,992 connections and a mobile penetration rate of more than 100 percent.
The Utilities Regulation and Competition Authority (URCA) revealed those details of the market in its recently released Retail Cellular Mobile Market Review and Assessment of Bahamas Telecommunications Company (BTC) and Aliv, the two MNOs in The Bahamas.
URCA said it has found that after six years, neither MNO holds a dominant position in the market and parts of the ex ante regulatory rules levied upon BTC – which was the significant market power prior to liberalization – should be eliminated.
“Specifically, URCA suggests that retail pricing rules should no longer apply to BTC’s retail mobile only bundles and standalone mobile calls, SMS or data. URCA suggests that the existing notification/approval procedures and the required biannual margin squeeze test reporting obligations will no longer apply to these services,” URCA determined.
URCA said as a result, beginning in the 2022 financial period, BTC is no longer required to submit accounting separation and cost accounting results in relation to its retail mobile activities.
In particular, between 2017 and 2020, Aliv saw the greatest share of successfully ported mobile numbers.
For example in 2017, Aliv successfully ported 22,871 mobile numbers compared to BTC’s 564; In 2018 Aliv secured 27,367 mobile numbers compared to BTC’s 7,266; in 2019 Aliv successfully ported 18,199 numbers compared to BTC’s 9,539; and in 2020 Aliv ported 8,224 compared to BTC’s 3,439.
These numbers represent fewer than 10 percent of the mobile market.
“Take-up of MNP (mobile number portability) varies from 7.48 percent of total mobile connections in 2017 to 2.79 percent in 2020. This means that on average about 6.34 percent of mobile consumers port their numbers each year. However, switching will not be all via the MNP process, so MNP figures are likely to underestimate switching in this market,” URCA said.
“It is worth noting that only six percent of persons surveyed have switched mobile providers according to survey evidence. In justifying their decision not to switch their mobile service provider, 88 percent of them said they were satisfied with their current mobile provider or mobile plan (despite being a prepaid dominated market and end users being price sensitive). This suggests to URCA that the vast majority of mobile consumers might have little or no incentive to switch their current mobile provider.”
The vast majority of mobile phone users, 82 percent, are on prepaid pay as you go plans, URCA noted, with the average user spending roughly $37 a month on mobile services.
“However, prepaid and postpaid mobile services are increasingly becoming alike, as both are offered as bundles with varying inclusions of data, and calls and mobile messaging. Compared to postpaid users, prepaid users are not tied into a contract, thus it is easier for them to switch or churn to other mobile plans or between service providers when they are dissatisfied with their current mobile service offering,” URCA said.
Despite rapid growth over the first several years of a liberalized market, URCA said growth in mobile penetration appears to be slowing as of recently.
“Cellular mobile technology and services remain an important and prevalent mode of communications in The Bahamas. Total mobile connections(including mobile data only service) increased by 14.26 percent between 2016 and 2020, from 365,840 to 417,992 connections,” the document said.
“The mobile penetration rate reached 98 per 100 population around the time of Aliv’s entry and between 2016 and 2020 the mobile penetration rate further increased by ten percent, from 98 to 107 per 100 of total population. Underpinning the upward trends in mobile take-up levels has been a 2.3 percent and 32 percent increase in penetration for mobile voice and messaging and/or data and mobile data only connections.”
URCA found that Bahamian mobile users have consistently preferred prepaid services, even before the liberalization of the market.
“From 2014 to 2020, end-users on prepaid schemes consistently exceeded 80 percent of total mobile connections. As at year-end 2020, prepaid and postpaid connections totaled 341,897 and 76,095, respectively. The corresponding values for 2014 are 265,971 and 47,431. Within the period, prepaid and postpaid connections increased by 28.55 percent and 60 percent, respectively. This meant that prepaid’s share of total mobile connections (including mobile data only) declined slightly, to 81.80 percent in 2020 compared to 84.87 percent in 2014,” URCA said
“These trends, however, offer no clear evidence on demand-side substitutability between the services. This is because these are likely to be part of broader changes in the nature of demand, rather than specifically being driven by relative price changes between prepaid and postpaid mobile services.”
URCA said given the habits of Bahamian mobile users, it considered whether a small but significant non-transitory increase in price (SSNIP) may lead to demand substitution from prepaid to postpaid mobile services or the other way around.
“Prepaid is typically geared towards more budget sensitive customers will lower usage profiles, whereas postpaid is targeted at less budget sensitive customers with higher usage profiles. URCA estimates that the typical consumer spends an average of $37 per month on mobile services and that prepaid customers currently use on average 45 minutes of domestic calls and 2.67 GB per month compared to average use of 88 minutes of domestic calls and 8.97 GB per month for postpaid users,” URCA said.
“Faced with a SSNIP in prepaid, a customer with an average use of about 45 mins/2.67 GB per month is not likely to find a corresponding postpaid plan and therefore is unlikely to consider switching from prepaid to postpaid services. The cheapest postpaid plan available to meet the average usage of prepaid users is priced at $44.99, which is above the average monthly expenditure across all mobile users of $37. This means it is unlikely to be rational for a price sensitive customer with average levels of usage (expenditure) to switch, especially when also taking into account the deposit requirement for postpaid plans.
“However, a postpaid customer (with an average use of about 88 mins/8.97 GB per month) is likely to consider switching to prepaid when confronted with a SSNIP in postpaid. In this case the cheapest prepaid plan available to them is priced at $60 per month, which is below the average monthly expenditure across all postpaid users of $61.82. In view of this, it is reasonable for URCA to assume that end users are more likely to switch from postpaid to prepaid rather than the other way around. Overall, URCA considers it reasonable to consider both prepaid and postpaid mobile services in the same product market, especially when taking into account supply-side considerations.”
“In an URCA survey, 71 percent of all respondents (1109) said they currently have mobile access in combination with calls and/or messaging services. This supports URCA’s preliminary view that in the Bahamian context, mobile access and domestic calls and/or messaging services are complementary or jointly consumed. In addition to this, Bahamians generally purchase mobile access and domestic calls and messaging and/or data as part of the same product bundle.”