Cell Phone Marketing in Rwanda

Constantly changing percentages written on the screen of MTN cell phones stand for constantly changing discounts on the amount charged per-minute. Depending on where you are in Rwanda, and even where you are within Agahozo-Shalom, you will be paying different amounts for calls if you use MTN. Strangely, when I learned this, and saw 90% on the phone, it was like seeing "90% Off" at the Gap. You think, "oooh! I am in a 90% zone! Quick, I should make a call to take advantage!" I haven't actually called anyone because of this, but there is that initial irrational yearning that I am sure some percentage of the population, when given some percentage, will give into.

This was introduced in light of Tigo, another cell phone service provider, entering the market in 2009 and MTN, perhaps, not wanting to admit that they actually lowered prices in light of new competition. Yvonne Makolo, MTN Rwanda Senior Marketing Manager, said in a New Times article that "Price cuts have never been the key to driving subscriber numbers." It's not price cuts, it's offering a "special discount" just for you, because you happen to be in just the right location. But you are almost always in the right location: calls from MTN used to cost 100 francs (around 17-20 cents) per minute. Now it's more like 10-50 francs (2-8 cents) because you are virtually, or literally, always in a "discounted" zone.

Interestingly, it differs from other cell phone service providers because the prices vary by location rather than periods of time. While MTN claims it doesn't really lower or raise its normal prices, there is no real way of checking this, because if everyone's discount is going up or down simultaneously without any connection to their location, then that is, in essence, a change in the base price based on time.

Because you buy airtime ahead of time, the amount per minute can change after you have purchased airtime. If you buy, say, 300 francs (50 cents) worth of airtime and think you can talk for 25 minutes, you may only be able to speak for ten minutes if the rate changes in your particular zone or period you are making the call. The more people using a particular zone, the more expensive it is to provide service, so the lower the discount is. Another way of looking at the discount is as an alternative to surcharges for speaking in an area with a dense population of MTN cell phone users. Loss aversion makes people happier about getting a discount for speaking on their cell in an area with fewer cell phones, compared to getting charged more for being in an area with a lot of cell phone users.

And just to maximize on this irrational happiness, the "discount" is always, and I mean always, above 50%.

In a perfectly rational economy, people would be more likely to buy airtime if it's cheap, then everyone will buy airtime, and then it won't be cheap. In countries with contracts specifying how much you pay ahead of time, this is a dilemma the cell phone companies need to deal with. But with airtime bought beforehand, the customer is faced with this little dilemma.

At the Gap, God bless the them, when they have a sale, they don't increase prices for a particular shirt that has already been marked down after you have purchased it. They don't even increase the price of a particular shirt before you have purchased it, if they have already marked it down. So even if everyone comes running to the Gap, you don't show up at the cash register, have them swipe your credit card, and then have that cute unisex white blouse show up on you bill as twice the price you thought you were paying, because everyone else also wanted to buy the cute unisex white blouse. So, in a way, developed countries' cell phone customers want to buy their airtime like they buy their merchandise, even when that doesn't quite make sense. We may be paying more for cell phone coverage because we are paying for the luxury of knowing, ahead of time, how much our calls will cost, even though the service changes based on how many people are buying it.

The market competition-induced zone discounts are convenient from a social welfare perspective. Areas where fewer people use cell phones are areas, in general, where people have less money. And those are the areas where airtime will be cheaper. Though at 10 francs a minute with the "full discount," it ends up the same price as Tigo's 10 francs a minute all the time to other Tigo phones - but few use Tigo, especially outside Kigali.

Rwandatel, the other third provider, was 80% owned by Libya. For a reason that "wasn't related" to the bombing in Libya, it lost its license to provide mobile services right after the decision to bomb Libya. A major Libyan-owned hotel in Kigali, Laico Hotel, also had its assets frozen. At first I heard the government was claiming it had nothing to do with the bombing in Libya, but Reutors reported Rwandan Finance Minster John Rwangombwa as saying that the freezing of assets was to decrease Lybian government influence. It may be that Rwandatel really wasn't doing so well - I have never met anyone who uses them.

I just made a phone call in a densely populated, wealthy area of Kigali where everyone has cell phones. Sure enough, I was charged 50 francs a minute rather than my normal 10 francs. But I am waiting for the day when I am charged the "base rate" of 100 francs.

One day I walked to the center of Rubona and every shop had massive blue Tigo signs above the entrances. But no shop seemed to actually sell Tigo minutes. This seems to be the case even in Kigali - there is advertising for Tigo in random shops that sell airtime. Often, only MTN airtime is available at these shops with Tigo signs, though sign-wise, the store is MTNless. But the blue color is lovely.