Although the Competition Commission’s decision to not probe the mobile duopoly of MTN and Vodacom may seem like a blow for consumers, it isn’t really. The commission this week took a decision to not refer the two mobile giants to the tribunal for prosecution, because there just wasn’t enough evidence to show the two were behaving in an anti-competitive manner.
This, the competition authority says, follows a lengthy investigation that revealed that there were several features in the mobile telephony market which affect the ability of smaller mobile operators to compete in the market. Cell C’s 2013 argument was that Vodacom and MTN used pricing strategies to encourage consumers to make what is known as on-net calls.
This means the companies were allegedly pricing calls between people who were on the same network cheaper than they were pricing calls from their networks to other networks - such as Cell C or Telkom Mobile. The difference in pricing between on and off net calls was such, Cell C argued, that competition was lessened and its margins were squeezed.
Sadly, the commission found that it would be unlikely to succeed in prosecuting this, although it did find that there was evidence that there was behaviour in the market that indicated it was difficult for late entrants such as Cell C to compete effectively. It said: “There is therefore a need to look broadly into the state of competition in the mobile telephony market in South Africa, specifically at the retail level, as the market is still dominated by two mobile market players, years after the licensing of Cell C and Telkom Mobile.”
As a result, the commission will chat with the Independent Communications Authority of South Africa (Icasa) to explore regulatory interventions that can make the market competitive. Thanks goodness.
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The high cost of making calls in South Africa has long been a bugbear, and analyst firm Ovum has several years’ worth of data showing that South Africa is just not competitive when it comes to its emerging market peers. And this is despite Icasa having placed the cost of communication high on its agenda.However, it seems that Icasa’s interventions in this regard have, for whatever reason, been limited to termination rates - the amount we get charged to land a call on a network that isn’t the one we have signed up with.
Icasa, a few years ago, claimed this as a great victory. Sadly, it doesn’t seem to have made any meaningful impact on people’s pockets. Instead, mobile operators have been bringing prices down off their own bat, because they have to be more competitive, and get in more customers. This is because the heady days of mobile operators being akin to money printing presses are long over.
This is because we’ve all shifted to data, and are using less voice; data is at much lower margins than voice use, and - although its use is growing - the pace is not nearly enough to offset lost revenue from voice. Every set of results you look at from the mobile players shows two key trends: more and more people are using data, and the cost of data and voice is dropping.
Take Vodacom’s latest results, for example. The operator took pains to point out that In addition, the effective price per megabyte has declined by 61percent over the past four years. Voice price per minute also declined by 52percent over the past four years. Despite these price cuts, consumers are still not happy - and I can’t blame them. We’re facing higher costs for fuel, food, power, debt and anything else you can think of. Salaries are not increasing at a rate that keeps pace with inflation - which at 6.1percent is thankfully moderating - and the economy just isn’t growing.
With a mobile penetration of more than 100percent - we all seem to have at least two SIMs - South Africans rely heavily on their cellphones. We use them to earn money, to find jobs, to stay in touch and even to learn.
They’re vital, almost as vital as water and power - and I’m sure cellphones help drive a large part of the economy. So I’m extremely grateful that a government entity is going to look into competition in this sector. We’ll either get cheaper rates, or learn that we’re just a nation of whingers.
Nicola Mawson is the online editor of Business Report. Follow her on Twitter @NicolaMawson or Business Report @busrep.