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Pacific Island mobile phone market update

…mobile phones are still unaffordable in some of the Pacific Island countries, in particular Solomon Islands, Papua New Guinea and Kiribati, which could be constraining consumer take-up.

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See our updated analysis of the rates as at March 2012.

Once again we are updating our comparison of mobile phone tariffs in several Pacific Island countries, which we first carried out in early 2008, then revisited in February 2009. This time around we are adding three new countries – the Cook Islands, Palau and the Republic of the Marshall Islands – to the eight in our previous sample – Federated States of Micronesia, Fiji, Kiribati, Papua New Guinea, Samoa, Solomon Islands, Tonga and Vanuatu.

We have compared mobile phone tariffs in the countries by calculating the average monthly spend for low, medium and heavy usage customers, based on the OECD 2006 basket usages. We have also measured the affordability of mobile phone services in the Pacific Island countries, calculated as the average monthly spend on mobile phones for each usage level as a percentage of the average monthly income (calculated as the GDP per capita divided by 12).

Of the Pacific Island countries in our sample, six now have two competing mobile phone operators – Fiji, Palau, Papua New Guinea, Samoa, Tonga and Vanuatu. The other five countries have monopoly mobile phone operators. So how do the mobile tariffs compare, and how do the new three countries stack up?

In general, we found that those countries which have two competing mobile phone operators have lower monthly spends on mobile phone usage. There are notable exceptions, however, with monopoly operator FSMTC in Micronesia consistently having one of the lowest monthly spends at all levels of usage, whereas both operators in Papua New Guinea have some of the highest monthly spends. The significant reductions in monthly spend that were seen in the early stages of competition in several of the countries now seems to have slowed down, with some monthly spends increasing over the last six months.

Both mobile operators in Papua New Guinea have shown significant increases in monthly spend for all levels of usage, with Digicel showing a much larger increase than Pacific Mobile, although Digicel still has a smaller monthly spend overall. The other most significant change noted in the original sample of eight countries was a dramatic decrease in monthly spend for monopoly operator Solomon Telekom over all usage levels. Our complete findings are detailed below.

The cheapest plans for each operator, and the resulting monthly spend for a low volume user (one who makes 30 calls and sends 33 text messages per month), are illustrated in Exhibit 1. Of the three countries included for the first time, the Cook Islands and the Republic of the Marshall Islands – both of which have monopoly mobile phone operators – are shown to have the highest monthly spend for a low volume user. Both the mobile phone operators in Palau have monthly spends in the middle of the sample range. As for developments in the original eight countries, the major change has been a dramatic reduction in the monthly spend for Solomon Telekom, which has gone from being the most expensive operator in February 2009 to near the middle of the range. There have been few other price reductions, with only Digicel Vanuatu, TCC Tonga and Digicel Tonga having modestly lower monthly spends from February 2009. For all the other operators the monthly spend has either shown no change or has increased, by up to 35% in the case of Digicel Papua New Guinea. Once again, monopoly operator FSMTC in Micronesia has one of the lowest monthly spends for a low volume user, at USD9.37. Both operators in Tonga also have monthly spends around the USD10 mark, whereas both mobile operators in Papua New Guinea are still significantly more expensive at USD38.41 and USD43.98 per month.

Exhibit 1: Monthly spend for a low volume mobile phone user [Source: Network Strategies]
Monthly spend for a low volume mobile phone user. Source Network Strategies

Similarly the monthly spend for a high volume user (someone who makes 140 calls and sends 55 text messages per month) is illustrated in Exhibit 2. Once again both mobile operators in Palau are in the middle of the range for monthly spend at this usage level. However, NTA in the Marshall Islands is also in the mid-range, and Telecom Cook Islands is no longer the most expensive operator, having lower monthly spends than both operators in Papua New Guinea, and with a similar monthly spend to TSKL in Kiribati. The most dramatic price change in the original eight countries for the high volume user is again the reduction in monthly spend for Solomon Telekom. Other than that there has been very little reduction in monthly spend for any of the operators, with several of them increasing instead. At the high volume usage level, FSMTC in Micronesia now has the lowest monthly spend, at USD37.37, closely followed by both operators in Tonga and Digicel in Fiji, with monthly spends ranging from USD40.30 to USD45.73. Both mobile operators in Papua New Guinea have the highest monthly spends at USD199.14 and USD236.27.

Exhibit 2: Monthly spend for a high volume mobile phone user [Source: Network Strategies]
Monthly spend for a high volume mobile phone user. Source Network Strategies

So, having calculated the monthly spend on mobile phones for different usage levels, how affordable does this make the services? To measure this we calculated what percentage of average monthly income is taken up by the monthly spends calculated. These percentages are illustrated in Exhibit 3. For a low volume user, in most countries the monthly spend represents 12% or less of monthly income; in Palau this is as low as 2.7%. However, there are some exceptions, as in Solomon Islands, Papua New Guinea and Kiribati the monthly spend on mobile phone usage for a low level user exceeds 20% of income, with the highest percentage being 28.9% in Kiribati. For medium volume users – generating 65 calls and 50 texts per month – the monthly spend represents less than 15% of income for most countries, although this rises to 57.7% in Kiribati. The percentage of average monthly income spent on mobile phone usage for a high level user ranges from 8.3% in Palau, to 122.2% in Kiribati.

Exhibit 3: Monthly spend on mobile phone usage as a proportion of average monthly income for low, medium and high levels of use [Source: Network Strategies]

Country Low-level
use
Medium-level
use
High-level
use
Cook Islands 5.3% 8.6% 14.3%
Federated States of Micronesia 4.0% 7.9% 16.0%
Fiji 4.8% 9.3% 12.8%
Kiribati 28.9% 57.7% 122.2%
Palau 2.7% 4.7% 8.3%
Papua New Guinea 22.2% 53.1% 114.9%
Republic of the Marshall Islands 12.0% 14.5% 20.7%
Samoa 4.0% 9.0% 14.6%
Solomon Islands 21.0% 45.2% 87.7%
Tonga 2.9% 6.5% 12.9%
Vanuatu 8.6% 12.9% 23.4%

The monthly spend as a percentage of income suggests that mobile phones are still unaffordable in some of the Pacific Island countries, in particular Solomon Islands, Papua New Guinea and Kiribati, which could be constraining consumer take-up. Exhibit 4 illustrates mobile phone penetration compared to the monthly spend as a percentage of income for a low volume user. Mobile phone penetration varies widely in the countries studied, ranging from less than 1% for Kiribati, up to 71% for Fiji. The countries with a relatively high monthly spend on mobile phone services as a percentage of income have the lowest penetration rates. In comparison, the countries where the monthly spend as a percentage of income is 5% or less for a low volume user all have penetration rates of over 25%. This same pattern is shown for medium and high volume users.

Exhibit 4: Mobile phone penetration compared to affordability [Source: Network Strategies, ITU] Mobile phone penetration compared to affordability. Source Network Strategies, ITU

Note that mobile phone coverage is still limited in some Pacific Island countries, with current mobile network coverage as follows:

  • Cook Islands: coverage is provided to Rarotonga and Aitutaki islands.
  • Federated States of Micronesia: coverage is provided to town areas of Kosrae, Pohnpei, Yap and Chuuk islands. Note: higher charges apply for calls between states.
  • Fiji: both Vodafone and Digicel provide coverage to the coastal areas of the two main islands (Viti Levu and Vanua Levu), as well as most of the inner islands. There is also some coverage on Kadavu Island.
  • Kiribati: coverage is provided to South Tarawa, Kiritimati Island and some parts of North Tarawa.
  • Palau: Palau Mobile provides coverage to the main populated areas of Babeldoab Island and the state of Koror. PNCC provides coverage throughout Palau.
  • Papua New Guinea: Pacific Mobile provides coverage to Wewak, Madang, Mt Hagen, Goroka, Lae and Port Moresby. Digicel currently provides coverage to Port Moresby and the provinces of Central, Morobe, Madang, Chimbu, Eastern Highlands, Western Highlands, Milne Bay, East New Britain, New Ireland and the autonomous region of Bougainville. Coverage is also provided in parts of East Sepik, Sandaun, Manus, Enga, West New Britain and Southern Highlands, with plans to extend coverage in these provinces during 2009. Digicel also plans to extend coverage during 2009 to include Ora, Gulf and Western provinces.
  • Republic of the Marshall Islands: coverage is provided to Majuro, Jaluit, Kili, Rongelap and Wotje.
  • Samoa: Digicel provides service to the coastal regions of the two main islands (Savai’i and ’Upolu), covering at least 80% of the population. Samoatel does not give details of its coverage on its website.
  • Solomon Islands: coverage is provided to Honiara only.
  • Tonga: both Digicel and TCC provide coverage to Tongatapu, and areas of the island groups of ’Eua, Vava’u and Ha’apai. Note: higher charges apply for calls to outer islands.
  • Vanuatu: Telecom Vanuatu provides coverage to limited areas in Santo, Ambae, Maewo, Malekula and Efate islands. Digicel provides coverage to areas in Santo, Malekula, Ambae, Maewo, Pentecost, Ambrym, Epi, Efate, Erromango and Tanna.

Notes for analysis of monthly spend:

  • Prices include GST (at the rate relevant to that country) and are in US dollars.
  • All prices were converted to US dollars using 2007 Purchasing Power Parity (PPP) rates sourced from the World Bank, where available, with the remaining PPP rates sourced from the World Health Organisation.
  • All plans were current as at 15 July 2009.
  • The prices for each operator represent the plan resulting in the lowest monthly spend
  • OECD mobile baskets of usage for a low user and a high user were sourced from the report: Revised OECD Telecommunications Price Comparison Methodology, July 2006.
  • GDP per capita data were sourced from the World Bank for 2007
  • Mobile phone subscriber numbers were sourced from the ITU for 2008.

August 2009


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