Are LIME Jamaica’s mobile rates reductions too little too late?

LIME Jamaica will be introducing a new TALK EZ mobile calling plan that offers significantly discounted rates, but is it enough to signal to the market that it is still a contender in the Jamaican marlet?

Yesterday, LIME Jamaica announced that as of today, 15 June, it will be offering a “TALK EZ” plan that offers significant reductions in mobile rates on-net calls and international calls to the USA, Canada & UK landlines (Source: LIME). The reductions are by as much as 63% for prepaid local calls, were reportedly precipitated by “new opportunities brought about by changes to the Telecommunications Act” (Source: The Gleaner).

TALK EZ will be one many calling plans offered by LIME. Hence consumers are required to opt-in for this new plan by dialling a special code. Furthermore, for those who might want to switch to LIME, the company is offering as incentives, a significantly discounted (JMD 999/USD 11.35) handset, along with discounts on its SIM card.

However, over the last several months much has been made about the massive financial losses that LIME has been experiencing in Jamaica, and even last month senior executives indicated that the parent company, Cable & Wireless Communications would be subsidising its operations to keep it afloat. Hence these drastic rate reductions are, at a minimum, likely to cause a stir in the local industry, but, when all is said and done, is it enough to change the tide in LIME’s favour? Or is it too little, too late?

How does the TALK EZ plan compare?

As at the writing of this post, the full rate sheet had not yet been made publicly available. Nevertheless, based on what has been gleaned from LIME’s press release, Table 1 compares calling rates of the generic “Anytime” plan and the TALK EZ plan for local calls from LIME Jamaica’s mobile network.

Based on calling rates alone, the TALK EZ plan is likely to significantly reduce the amounts spent by LIME customers on mobile service. (Should the plan have a monthly subscription, for example, which has not yet been revealed, this might not be the case.) In our Snapshot of monthly mobile spend across the Caribbean, the most recent of which was published in May, we have been using three baskets of mobile services comprising different volumes of calls, SMS and MMS services that might cater to a Low Volume (LV), Medium Volume (MV) or High Volume (HV) user. To produce our results, we averaged the rates from the two largest mobile providers in a particular country, as applicable. In the case of Jamaica, our calculations included rates from both LIME and Digicel, and for the former, we used its Anytime plan. Hence Figure 1 shows the likely impact of the TALK EZ plan on monthly spend, versus that previously calculated in our May Snapshot.

Across the three basket of services, monthly spend for LIME customers decrease by a minimum of 48%, for a LV Basket, to as much as 57%, for a HV Basket of services.  For an LV Basket, LIME customers may spend as little as USD 2.89 (JMD 252.79) per month, as opposed to the earlier market average of USD 5.52 (JMD 483.37) per month. Similarly, for a HV Basket, the monthly spend would decrease from USD 27.99 (JMD 2,449.46), to USD 12.14 (JMD 1,062.62).

The impact of those monthly spends for the pre-defined baskets of services, against monthly income, are shown in Figure 2. The average monthly income in Jamaica, based on per capita GDP figures, has been estimated at approximately JMD 35,772.06 (USD 408.25).

The percentage reductions in the impact on monthly income across the three baskets of services are identical to those realised for the monthly spend: 48%, for a LV basket; 53% for a MV Basket; and 57%, for a HV basket. Hence LIME customers are likely to find these new rates considerably more affordable, since a LV basket of services will consumes as little as 0.71% of their monthly income, to as much as 2.97%, for a HV basket of services.

Will throwing down the gauntlet work?

Without a doubt, LIME’s new rates will be a shot in the arm for the mobile market in Jamaica. Moreover, this initiative may signal that LIME is still a contender in a market where its competitor, Digicel, reportedly has a customer base that is at least twice that of LIME’s. However, what are the likely outcomes of this move?

First, expectations that Digicel customers will abandon that provider to take up LIME might not necessarily happen in droves or in numbers substantial enough to affect Digicel’s market power. Throughout the years, Digicel’s customers have been especially loyal to the company, and noting that LIME’s mobile network coverage is less comprehensive in rural areas, consumers might have no choice but to remain with Digicel.

Secondly, in the absence of mobile number portability, even if Digicel customers wished to switch to LIME to take advantage of the new rates, they would have to relinquish their existing mobile numbers, which many would find unpalatable. Some, however, might be prepared to purchase a separate LIME handset, but since Digicel’s customer base is considerably larger than LIME’s, persons might still find that an appreciable number of their calls are on Digicel’s network. Hence Digicel would be better placed to offer attractive rates and incentives to their customers for services on their network.

Finally, although Digicel (for whatever reasons) might wish to contest LIME’s rate reductions as anti-competitive, and recognising that the absence of mobile number portability inherently works in Digicel’s favour, it is likely to offer a plan that competes directly with TALK EZ. Nevertheless, it will be interesting to see, over the coming days, what Digicel’s reaction will be to this new development.

Final remarks

The next few months are likely to be a “do or die” period for LIME, where it somehow must significantly alter its current trajectory, and return to profitability. It is only hoped that this new promotion is just the start of some far-reaching changes the company plans to introduce over the coming months.

It is interesting to note that in Jamaica’s telecoms sector, the focus is still on voice, and mobile/cellular service, in particular. However, global trends, which are already becoming evident in Jamaica and the wider Caribbean, show an emphasis to data, specifically Internet technology, which can support voice, data, video, and Internet services. As a result, both fixed-line (voice) and mobile services providers have been experiencing reduced revenues, since consumers have alternatives  via the Internet that might be more affordable and convenient.

Furthermore, Universal Access and Universal Service policies in telecoms, have themselves widened to include Internet as a basic service: it is not enough to provide access to voice services. Hence it could be argued that LIME Jamaica could make a more significant impact if it strengthened its position in data services, especially mobile broadband, which is still quite expensive and not widely used by consumers.

________