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Analysis of an oligopoly phone industry in South Africa

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  1. Introduction.
  2. The concentration ratio of the industry.
  3. The nature of the competition.
  4. Is there is a price leader in the industry?
  5. The evidence of abnormal profits.
  6. The barriers to entry in the industry.
  7. The interdependence.
  8. Conclusion.
  9. References.

With more than 30 million South African mobile phone owners in 2007, the most powerful and the most developed country of Africa plays an important role on the international mobile phone market. According to data from the ?SA Mobile Market? statistical handbook, the South African market's size is more than the Australian and Canadian markets combined and ?close behind the mobile market in Spain?. In South Africa, the industry is dominated by three companies: Vodacom, MTN and Cell C which operate persistent high prices. With 58% of market shares (Telkom Annual Report 2007) Vodacom is the leader of the market. MTN has 34% of market shares (MTN Annual Report 2007) and Cell C reaches 8%. According to the Competition Act, both Vodacom and MTN can be classified as ?dominant? in the mobile phone industry. It is also relevant to note that the combined market share of the two major companies is more than 90%.

Tags: Oligopoly in South Africa, South Africa Oligopoly firms, Oligopolies in South Africa

[...] In this way, according to the company annual reports (2007) and ICASA, the HHI of the South African mobile phone industry can be calculated as follow: HHI = 10,000 [ (market share of Vodacom)² + (market share of + market share of Cell HHI = 10,000 (58 + + = 10,000 x 0,4584 HHI = 4,584 The South African mobile phone market is highly concentrated, which is typical of an oligopoly. The nature of the competition Using a non-price competition strategy is common among oligopolies. [...]

[...] This non-price strategy in the South African mobile phone industry involves also an increase in marketing research, new product development and brand management costs. According to Ipsos-Markinor Brand Survey (2005), Vodacom is the South Africa's favorite advertiser and the second preferred overall brand. Retaining customers is a one of the main targets of the mobile phone operators. Because the market becomes mature in South Africa and the costs of switching operators are decreasing, customer retention is the crux of the strategy. [...]

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