Johannesburg - MTN’s announcement that it will slash the prices of fibre broadband data bundles by 50 percent is excellent news for consumers and will almost certainly prompt similar moves by competitors.
That’s the view of industry analyst, Arthur Goldstuck, who described the move as a “welcome, if overdue, acknowledgement” by MTN that its previous pricing model was unsustainable in the competitive fibre-to-the-home (FTTH) market.
MTN announced the price cuts on Tuesday, saying that they would “boost the competitiveness of its propositions”.
Goldstuck, the managing director of technology research company World Wide Worx, said the MTN announcement was a sign that the company had realised its strong position in the cellular market did not translate into automatic dominance of the fibre broadband space. “It’s actually been the smaller more nimble players, led by the likes of Vumatel, who have been setting the pace in the FTTH market. The big boys like MTN and Vodacom find themselves in the unaccustomed position of having to play catch-up.”
He said Telkom had been the first to recognise this reality and move aggressively into the market with its announcement last September that it intended to roll out fibre broadband connections to 1 million homes by 2018. Last month, Telkom announced that it would piggy-back on the open-access fibre network of Vumatel to offer its products in 21 new suburbs in Gauteng.
“The price cuts are MTN’s response to the realities of the FTTH market and it’s excellent news for consumers. Its bigger competitors are likely to respond with similarly competitive offerings and this will keep the smaller players even more on their toes. This will translate into a wider choice of cheaper fibre broadband packages for consumers. Lower prices, in turn, will prompt demand from areas that would not have previously considered fibre as an option,” Goldstuck said.
In addition to the fibre broadband price cuts, MTN also announced that customers signing up for a 24-month contract before the end of September would get free installation and a router, as well as bonus data bundles that are the equivalent of the bundle option.
They will also get twice the amount of night bundle data to use between midnight and 6am.
Bundles start at 20 gigabytes (GB), which comes with 20GB of bonus data and 40GB of night data for R40. A 1 terabyte (TB) bundle includes 1TB of bonus data and 2TB of night data and costs R999.
MTN does not currently offer uncapped fibre bundles.
The installation fee for month-to-month contracts has also been reduced from R3 000 to R999 to “enhance the products’ value proposition”.
The generally favourable response to the announcement comes as a badly-needed dose of positive news for Africa’s biggest telecoms company after what has been a torrid nine months for management and shareholders. In October, Nigeria’s industry regulator imposed a $3.9 billion fine over unregistered SIM cards in what is MTN’s biggest market, prompting a 30 percent drop in the company’s share price.
Last month MTN announced that it had struck a deal with the Nigerian authorities to pay less than half of the original fine, reportedly with the assistance of former US attorney-general Eric Holder, whom it had hired as a negotiator in January.
While the market welcomed the news – MTN shares have risen by about 25 percent since January – its South African customers were in for a shock, with the company quickly following the settlement announcement with news of a drastic hike in the price of voice calls.
The changes are due to come into effect on August 1 and will also see significant decreases in value across many of MTN’s contract packages.
When weighed against this, the reduction in fibre data bundles will benefit a relatively tiny proportion of South African consumers. But they nevertheless give the company a sorely-needed opportunity to tell a positive story.
“The R12bn capital expenditure that MTN has committed in this financial year will bode well for our quest to build high performing networks and will bolster our ability to provide our customers with a seamless network experience,” chief enterprise business officer at MTN Business, Alpheus Mangale, said.
MTN has a fibre network footprint in Gauteng, Western Cape, KwaZulu-Natal and the Eastern Cape.
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