2 JANUARY 2002

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The year of the mobile phone

While the Chinese ushered in the Year of the Snake in 2001, Malta ushered in its very own, Year of the Mobile Phone

Ever since the advent of mobile telephony in Malta in the early nineties, the mobile phone was considered to be a luxury. Mobile phones were expensive, rates were exorbitantly high and customers were constrained to buy the service from just one company.

But all this changed during 2001. The breakthrough date came in December of the previous year when Go Mobile was given an operating licence. The previously restricted market was liberalised and the affect was felt immediately. The day Go Mobile commenced its operations, mobile phone rates shot down across the board.

In the period of a year the mobile phone changed from a luxury item to a necessity, which is now used by businessmen, housewives, students and children alike.

Credit must be given to Go Mobile for the aggressive competition it showed in the market. The success of the one-year-old company is commendable to say the least. Competition was not easy in view of Vodafone’s established market share, which was built slowly over a number of years. But the Maltacom subsidiary now has 36% of the market share and an active subscriber base of 70,000 with a view of reaching the 50% mark during the next year.

Change is nothing new to the Maltese Islands. Revisiting our chequered history reveals numerous occasions were the inhabitants of these islands were subjected to radical changes brought about by historical circumstances beyond their control.

Today, Malta is again experiencing a period of economic change. The only difference being the speed and magnitude by which change is occurring. And the mobile phone sector can best attest to the current transformation of the economy.

Statistics released by the National Statistics Office in July this year show that in just a year, the proportion of the population with a mobile phone increased from 11.4 per cent to 36.1 per cent. Mobile phone subscriptions in the first quarter of this year shot up by an incredible 218.2 per cent when compared to the same quarter in 2000.

Competition between Vodafone and Go Mobile spurred new investment into value added services, created jobs but most of all brought the mobile phone rates down. Although our mobile phone rates are comparatively highly in relation to other European countries, the consumer has benefited immensely. The fruits of liberalisation were and still are being felt in a country that is accustomed to dealing with monopolistic environments. The mobile phone example could be considered as a benchmark for further liberalisation in other sectors of the economy.

The mobile phone revolution may still be in its infancy although executives from both Go Mobile and Vodafone believe that the market will reach saturation some time during 2002.

In the words of the Malta Communications Authority chairman, Joseph V. Tabone, "if we’re serious and professional in this arena, the future can be very bright."

In an interview given to a local newspaper in October, Mr Tabone spelt out the Authority’s role in the changing communications environment. "We have to help in moulding the environment and to make sure that competition prevails. We don’t want to hit people over the head with a hammer. We have to make sure that customers are getting a fair deal," he said.

Mr Tabone was clear about the need for healthy competition. "Competition need not mean annihilation. Operators should only strive to be better than their competitors, and not to do their utmost to destroy the others in order to resort to a monopolistic market."

The ultimate beneficiary of the mobile phone war between Go Mobile and Vodafone has been the consumer. However, despite the encouraging figures, Malta still lags behind the average penetration rates in most other European countries. The road may still be a long one to travel.

Later in the year, when interviewed by this newspaper, Mr Tabone explained, "Having this liberalisation of telecommunications is vital in terms of the economic development of any country, because telecommunications provide the underpinning for many of the things that we do both socially and in business, so it’s really quite different to other types of liberalisations."

When asked what he envisions for the future of telecommunications in Malta, Mr Tabone replies, "Government is currently in the process of determining how to approach UMTS in terms of providing licenses or otherwise.

"In addition to that, we are trying to gauge the scope that there is in such a market for a number of operators. On the one hand you can have an open policy that licenses anyone who applies for a license. At the same time you can have a practice, which has been adopted by several countries, that would allow the market to decide how much competition there should be.

"Our approach to that - from the standpoint of sustainability and the better interest of the consumer - is to try to strategically determine how many service providers one can afford to have.

"It would not be in the interest of the people to have half a dozen service providers, in any line of service, if they then start collapsing."

Meanwhile, Mr Tabone is adamant that Malta’s telecommunications infrastructure must be improved, explaining, "Undoubtedly this is an area in which technology is continuously evolving so there is always scope for improvement and there have been major investments in the infrastructure over the last several years.

"Now the means must somehow be found with which to improve our international connectivity, which is a weakness given the fact that at the present time we are dependent on a single fibre-optic link, even though this link does afford us with an adequate capacity. Of course we are anticipating the use of this cable to be increased a good deal over the next few years to come and I think it is very important to have a built-in redundancy and not being completely dependent on the single link."

Meanwhile, along with the mobile phone boom, has inevitably come the SMS boom. We have all become familiar with the sight of people endlessly tapping away at the mobile phones – at the cinema, while dining out and at practically any place at any time.

Malta’s mobile phone users have developed a passion for the Short Message Service (SMS), according to figures given by Vodafone Malta head Joe Grioli to the Malta Financial and Business Times when recently interviewed.

Maltese mobile network operators are handling an average of 70 to 80 SMSs per month per user – almost double the Europe-wide average of 45.

Simple mathematics tells us that the Maltese are sending some 15 million SMSs per month, or 180 million a year.

This is, Mr Grioli, mainly due to the large differential between the local price of mobile phone calls and the price of SMSs.

Mr Grioli explains, "Typically in the UK an SMS costs 10p, compared to an average of about 20p for a voice call. Here the average phone call can be anywhere between 18 and 22 cents per minute, while SMSs are two or three cents, which is ridiculously cheap."

However, Mr Grioli wonders how long the trend will persist, especially in terms of sending SMSs overseas. He elaborates, "We are now being, or will be, charged termination costs in excess of two cents. Accordingly, it will not be sustainable to send SMSs abroad for just two or three cents.

"At the moment operators are not charging each other for termination of SMSs internationally, but over the next six months we will be charging each other for terminating.
"The Internet is causing the problem really, not by mobile operators. One can find numerous Internet sites where SMSs can be sent for free, which means that we are terminating SMSs here for service providers abroad and we are not getting paid for it although they are using our network. This will have to change.

"We belong to the GSM Association, which regulates these matters and, while they won't tell us how much to charge each other, at least a decision has been taken that charges should be instituted. These providers are misusing the service. For example, you can find service providers in South Africa selling SMSs at five mills and they can do it because they are not paying out termination costs."

When asked what innovations are in store for the mobile phone consumer this year he replies, "While we have several upcoming innovations, at the moment we are experimenting and will soon be launching Virtual Home Environment, which is already working in some countries.

"The virtual home environment allows one when abroad to, for example, use all of Vodafone Malta's short easy to remember numbers - such as 909 for mailbox, 247 for customer care - the same as though you were in Malta. The idea is that wherever our customers are, they are virtually at home. Eventually, even 09190 for directory enquiries will be available in the scheme.

"We have several other products in the pipeline and our customers will be kept up to date with what is available on a world wide basis. We guarantee we will not fall behind the rest of the industry in terms of availability of products."

These words were encouraging but Mr Grioli but this newspaper had the feeling that Mr Grioli was clearly concealing the other ideas up Vodafone’s sleeve. And, as has been consistently demonstrated in the past, when Vodafone innovates, go mobile follows suit, and, of course, vice versa.

Both Go Mobile and Vodafone are confident that they can capture the heart of the Maltese market. Executives from both companies expressed their conviction that the mobile phone and subscriptions will again be the favourite Christmas present for 2001. With enticing rates and Christmas offers consumers are spoilt for choice and 2002 will surely consolidate the success achieved this year by Vodafone and Go Mobile in particular.

The Business Times, Network House, Vjal ir-Rihan San Gwann SGN 07
Tel: (356) 382741-3, 382745-6 | Fax: (356) 385075 | e-mail: editorial@networkpublications.com.mt