The Maltese mobile telephony sector has made significant strides over the past years, especially in bringing new products to the market and in rolling out infrastructure to supply improved mobile broadband services on a nationwide scale.

Rising penetration alongside changing preferences when it comes to voice and data consumption boosted operators’ confidence to innovate on their product line-up and to develop their network platforms for the delivery of faster and better services.

The local mobile market had been for several years characterised by two major operators, GO and Vodafone Malta. An important change in the competition dynamics of the sector came about in 2008 with the arrival of a new mobile network operator (MNO), Melita.

This three-player market scenario led to a more competitive environment, with the MCA deregulating the market in 2012. Notwithstanding this approach, the MCA still maintains a certain level of regulatory oversight to avoid potential downside risks to competition.

Only last year, the Malta Communications Authority signalled the risks to competition that would arise in case the market reverts back to a two-market player scenario. Industry called for market consolidation as a platform for increased investment and better quality of service. While such an outcome cannot be ruled out, the analysis carried out by the MCA underlined that there is still scope for increased price competition in the mobile telecommunications market and that a two-player market scenario would not reap the best results in this respect.

Effectively, the analysis highlighted that, in the medium- to long-term, prices would have gone up rather than down.

A scenario void of a maverick third network operator risked destabilising competition dynamics in the market. This when considering that it was only after market entry of a third MNO that the Maltese mobile telephony market started exhibiting renewed growth, price declines and a faster drive to improved quality.

It is also fascinating to observe that, once the plans for market consolidation were put to the side, all MNOs reinvigorated their efforts to compete on the basis of price and quality, two essential components of value for money.

A scenario void of a maverick third network operator risked destabilising competition dynamics

The market in itself maintained a healthy growth rate, with subscriptions going up by some 20,000 in the 12-month period to March 2018 and, more importantly, two thirds of this growth being explained by higher take-up of post-paid plans.

This upward trajectory for post-paid put the proportion of local mobile subscribers on post-paid plans at 35 per cent by the end of the first quarter of 2018. This change had an evident positive impact on the revenue base of local MNOs, given that access-based revenues represent one of their most important revenue generators.

There are a number of possible reasons for this shift towards post-paid. Generally, MNOs have sought ways to improve the value for money of their pay-monthly tariffs, for example by including allowances of voice call minutes, text messages and data. This flat rate fee charging mechanism typically translates into a lower rate charged per voice call minute/per SMS/per Mb of data than would be the case for pre-paid plans.

Another benefit of post-paid plans is the opportunity for the end-user to purchase mobile handsets, potentially with more favourable conditions when it comes to the financial outlay when buying the handset. Ultimately, opting for a post-paid plan could ‘help’ the end-user buy the latest smartphone by spreading the high cost of handsets over of a two-year or three-year contract term agreement.

Meanwhile, the upward trend in the take-up of post-paid will persist, also considering the current efforts of service providers to diversify their product portfolios, by way of more competitive pricing schemes and additional flexibility to the end-user.

The milestone where the number of subscribers on post-paid plans outnumber their pay-as-you-go counterparts may also be within reach, considering that, for example, 58 per cent of Melita’s mobile clients at the end of 2017 had a post-paid subscription.  Changes in subscriber share are likely to remain in synch with historical trends. In such an environment, local MNOs will seek to attract subscribers from the competition, to sustain higher revenue streams and the profitability of the existing customer base.

The presence of a third MNO will be an important disruptor to the larger operators, and will serve to drive even stronger competition in terms of product line-up and prices.

One would also expect a bigger emphasis over the coming months on plans that feature inclusive units of consumption (or allowance) of voice minutes, SMSs and in particular, data. This is already evident from the recent changes observed in the post-paid line-up, with MNOs introducing ‘dual’ entry-level plans featuring different voice, SMS and data allowances to target different consumption profiles.

Another change relates to the introduction of various applications, including those that do not eat into the data caps of end-users. Ultimately, the potential for revenue generation would therefore lie in the ability of attracting new customers and in stimulating further growth in consumption of mobile services.

Subscriber base 2014 2015 2016 2017
Number of subscriptions* 546,229 557,583 585,470 604,759
Average year-on-year growth -1.87% 2.08% 5.00% 3.29%
         
*Number of subscriptions recorded as at end of year.
Apportionment of subs. by type of plan* 2014 2015 2016 2017
Post-paid 30.42% 32.69% 33.69% 34.79%
Pre-paid 69.58% 67.31% 66.31% 65.21%
         
* As at end of period.      
Market share developments* 2014 2015 2016 2017
Vodafone Malta 44.28% 43.94% 44.14% 43.22%
GO 39.08% 38.24% 37.19% 36.74%
Melita 14.78% 16.01% 16.99% 18.58%
Other 1.91% 1.86% 1.81% 1.67%
         
*As at end of period.      

Kevin Caruana and Roderick Gusman are  senior managers at the Malta Communications Authority.