-----------------------------------
As promised in last week�s issue of
GSM Today, here is the article on
the underlying calculations of
Commercial Phone Products with
special emphasis on the BUMPA Card
-----------------------------------
THE BUMPY ARITHMETIC OF THE BUMPA CARD.
=======================================
Last week, we looked at the five different
technologies being employed by the GSM and Fixed
Wireless Access (FWA) networks as they waged a war in
the Commercial Phone arena.
This week, we want to look at the arithmetic behind
those technologies.
I wish it was easy to explain.
Basically, all the technologies ask you to pay a chunk
of money for the �privilege� of making calls at
tariffs that are lower than normal. This privilege is
usually 30 days.
When you correctly understand what is going on, you
will know which billing platform to adopt and you may,
<GULP>, even be able to bet the network at their game.
I think.
CONTRACT-LIKE
-------------
It is helpful to view the various Commercial Phone
cards and technologies as a contract package in
disguise.
In a contract package, apart from a �security
deposit�, you also pay a monthly access fee. That
monthly access fee allows you the low tariffs that the
contract subscriber enjoys.
Let�s compare Globacom Mobile�s contract product
(Post Paid Plus �The Optimiser) and its Commercial
Phone product (Profit Max):
PRODUCT MONTHLY FEE TARIFF (OTHER NETWORKS)
-------- ----------- --------
OPTIMISER N2,500 N24 /min
PROFIT MAX N2,500 N21 /min
The subscriber pays something every month (whether it
is called a Monthly Access Fees or a Monthly
Deduction) and enjoys low tariffs.
Look at MTN BusinessTIME and BoosterCard:
PRODUCT MONTHLY FEE TARIFF (OTHER NETWORKS)
-------- ----------- --------
BUSINESSTIME N3,000 N24 /min
BOOSTERCARD N2,500 N23 /min
Again, you pay something every month to enjoy low
tariffs. The big difference therefore is that you skip
all the documentation in the Commercial Phone product
and you don�t pay any security deposit.
But while in a contract package, the network eats up
your monthly access fee, it dare not do that with the
Commercial phone product because that money will come
in handy in offsetting those very low tariffs.
THE BUMPA EFFECT
----------------
Until the BUMPA range came out, everything was nice
and simple. The call tariffs hovered around N22-24
/minute for certain reasons.
First of all, the figures gave some breathing space
(sizable profits). Secondly, and more importantly, the
figures factored in the interconnection fees.
The BUMPA tariffs changed all that!
The N9,000 BUMPA Card�s tariff of 20 kobo per second
worked out to a mere N12 per minute!
Normally, Vmobile charges 80 kobo per second. One
minute (60 seconds) becomes N48. And now Vmobile is
offering N12 per minute? Wow.
Does that mean the network is ready to suffer a �loss�
of N36 per minute?
No way.
That is why you paid N9,000 upfront. Vmobile will use
that amount to off-set its �losses�.
In fact, N9,000 can take care of 250 minutes of such
losses. In other words, for 250 minutes, Vmobile still
makes a profit from your calls.
Lets call it Vmobile�s �PROFIT MINUTES�.
So it is now a question of how many minutes you spend
talking within a 30-day period. If you exceed N250
minutes, then Vmobile starts losing money.
ADVANTAGE ZONE
--------------
Let�s say, you run A Commercial Phone Operation with a
Vmobile line. You have loaded a N9,000 BUMPA Card and
then bought a N1,000 recharge card.
How many minutes of talk time can you get you out of
the N1,000 recharge card?
Answer: N1,000 card @ N12 per minute is 83 minutes.
(Without a BUMPA Card, a N1,000 recharge card gives
you only 21 minutes)
This means that by the time you use 3 recharge cards,
the 250 �profit� minutes of the N9,000 BUMPA Card is
over and done with.
By card #4, Vmobile begins hemorrhaging financially.
You are enjoying very low rates while Vmobile is
losing cash. And this will go on until your 30-day
period is over!
That should not have been a big problem if all your
calls start and end inside Vmobile�s network. After
all, a network can give your FREE calls if it wishes.
The problem is with calls to OTHER networks and
something called �Interconnection agreement�.
INTERCONNECTION FEES
--------------------
Vmobile has to pay N18 to MTN, MTEL and Globacom
Mobile for any call to their network because the
networks �terminate� the call using their equipment.
Similarly, they also pay Vmobile N18 for any call from
their network to a Vmobile number. That is what
�interconnection agreements� are all about.
That N18 must be factored into the tariff of the call.
While Vmobile�s normal tariff of 80 kobo per second
(which is N48 for one minute) can take care of the
N18, the N9,000 BUMPA Card super-low tariff cannot!
The N9,000 BUMPA Card translates to N12 per minute.
That means Vmobile needs an extra N6 to pay the other
networks for each call they terminate.
(You can now see why the lowest tariff in Nigeria is
N18. That is why MTEL had to increase their tariffs
from N22 before they could successfully interconnect
with the other GSM networks.)
Vmobile soon found itself in trouble.
A typical Commercial Phone Centre using a N9,000 BUMPA
was causing more harm than good. It will definitely be
generating more calls to �other� networks (MTN, MTEL
and Globacom Mobile) than calls to Vmobile. And every
of such calls was causing a N6 loss because of the
interconnection termination fees.
And after using 3 recharge cards the N9,000 �deposit�
was gone.
What a paradox! Thanks to the Bumpa Card, Vmobile
became the MOST POPULAR network for Commercial Phone
Centres but IT WAS IN TROUBLE.
No wonder it pulled the plug...
BUMPA RELOADED
--------------
April 1st 2005: the new tariffs of the N6,000 and
N9,000 take effect.
The tariffs for �other networks� are now the same for
both cards: 40 kobo per second.
40 kobo per second translates to N24 per minute.
(What a jump from N12!)
The �loss� of Vmobile this time is N24 (subtracting
N24 from N48)
Thus, as from April 1st 2005, Vmobile now suffers a
loss of N24 per minute instead of the former N36 when
you use the N9,000 BUMPA Card.
THE DIFFERENCE
--------------
Now, the N9,000 paid for the card is used to make up
the difference. The amount gives us 375 �profit
minutes�.
After making calls in excess of 375 minutes, the
Vmobile networks starts losing money.
How many minutes of talk time can you get with a
N1,000 recharge card calling at the new rate of 40
kobo per second (or N24 per minute)?
You get 42 minutes.
By the time you use 9 cards, the 375 profit minutes is
finished.
By card #10, you start making cheap calls at Vmobile�s
expense.
HOW MANY IN 30?
---------------
The key question now is:
Can a Commercial Phone Centre use 10 recharge cards in
30 days?
That was possible in the past, but the average these
days is one N1,000 card every 2 days.
Also considering low business on weekends, 9-10 cards
per month is just about the average number of recharge
cards used per month by Commercial Phone Operators.
This is good for Vmobile. It means very few Operators
will be able to use up to 10 cards within 30 days and
enjoy the low tariffs for free.
The new tariff also takes care of the N18
interconnection fee. Vmobile doe not lose a single
naira but instead now makes a small N6 profit for
calls to other networks.
Vmobile has solved the problem...
But, have created a new set of problems....
NEW TWISTS
----------
The new problem: The N3,000, N6,000 and N9,000 now
have the same tariffs of 40 kobo (for calls to other
networks)!
The only difference is in the tariffs for �Vmobile-to-
Vmobile� calls:
PRODUCT PRICE TARIFF TARIFF
(SAME) (OTHER)
------- ------ ------- -------
N3,000 BUMPA Card N3,000 40 kobo 40 kobo
N6,000 BUMPA Card N6,000 30 kobo 40 kobo
N9,000 BUMPA Card N9,000 20 kobo 40 kobo
So why buy a card for N9,000 when the N3,000 BUMPA
Card offers the same tariffs?
When Commercial Phone Centres get wind of this, the
N9,000 will be quickly replaced by the N3,000 BUMPA
Card. This gives them a simple, flat tariff of N24 and
they get the same 30 days window too. For only N3,000.
Disregard the offer to pay 20 kobo per second. The
popular tariff today is N20 per minute. Subscribers
are ready to pay that amount for calls to ALL
networks.
CONCLUSION
----------
The increase of April 1st 2005 has saved Vmobile from
one of the greatest mistakes ever made in the Telecoms
sector. Vmobile�s miscalculation must have cost the
network millions of naira in revenues, not to mention
degrading its network quality.
It has truly been a �bumpy� ride.
Unfortunately, its Econet Wireless tariffs mean that
the N9,000 Bumpa Card has also lost its appeal. It is
now similar in tariffs to the original BUMPA Card of
2004.
In other words, WE ARE BACK TO SQUARE ONE.
=---
Sagai John Adam is the Editor of GSM Today E-zine,
Nigeria's FIRST GSM newsletter
Sagai John Adam is the creator of Nigeria's FIRST Internet discussion on GSM.
You can join him and other GSM Subscribers to talk about GSM tips, tricks, and
survival strategies in the "Lets-Talk-GSM" discussion group. To join click the
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Mails: GSM Today, P. O. Box 10342, Garki, Abuja, 900001.
Phone: +234-(0)803-311-9120
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