Markt Structure MTN And Vodacom

Topics: Oligopoly, Barriers to entry, Economics, Monopoly, Perfect competition / Pages: 6 (1099 words) / Published: Mar 18th, 2015
QUESTION 1
QUESTION 1.1 Market structure MTN and Vodacom
1.1.1 Introduction
The South African mobile market structure can be classified as an oligopoly, or even a duopoly, with two firms, Vodacom and MTN of more or less the same size dominating the market. Both Vodacom and MTN have market shares of at least 35%. This implies that both firms can be classified as ‘dominant’ i.t.o. the Competition Act. It is also important to note that the combined market share of the two large players is approximately 80-90% which should be an indication of their collective market power. Where two large companies control a market (duopoly) and they have similar cost and pricing strategies, competition levels may not be optimal.

1.1.2 SA mobile Market Share past and present

Figure 2: Mobile market share in terms of subscribers (2005)
SA mobile market share in terms of subscribers (2005)

Source: Company annual reports, and ICASA

It is important to note that MTN and Vodacom were the first two early entrants into the mobile industry in 1994 (Duopoly), Cell C followed suite in 2001. Research has shown that prices to communicate in SA are abnormally high. Research ICT Africa has proven that the prices for communication charged by MTN and Vodacom are excessive when compared with the prices of similar operators elsewhere in Africa.

This is due to the fact the MTN and Vodacom were the only two mobile providers from 1994-2001, no other competition.

Current Market Structure

December 2011- December 2013
Subscribers (Millions) and Market Share
Operator
2011
Market Share
2012
Market Share
2013
Market Share
MTN
20.9
33.6%
24.5
37.3%
25.0
36.8%
Vodacom
31.7
50.9%
29.97
45.6%
29.28
43.0%
Cell C
8.2
13.2%
9.4
14.3%
11.7
17.2%
Telkom Mobile/8ta
1.14
1.8%
1.48
2.2%
1.54
2.3%
Virgin Mobile
0.3
0.5%
0.4
06%
0.5
0.7%
Total*
62.24
100%
65.75
100%
68.02
100%

SA Mobile Subscribers 2011-2013
Above table show that both Vodacom and MTN are also dominant in the SA mobile industry followed by Cell C

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