MTN, Vodacom fall on price war talk

Comment on this story


MTNStore1

Reuters

A customer leaves an MTN shop in Johannesburg.

Johannesburg - A potential price war between South Africa’s two largest mobile-phone operators has made Vodacom the second-worst performer among the nation’s biggest stocks this month.

Vodacom, the wireless company with the most South African subscribers, has declined 6.7 percent this month, making it the second-worst performer on the 42-member FTSE/JSE Africa Top 40 Index in April, after media company Naspers.

MTN, Africa’s biggest mobile-phone company, slid 1.2 percent.

The gauge of South Africa’s largest and most liquid stocks gained 1.4 percent over the same period.

The Johannesburg-based operators are being squeezed by declining voice revenue as the nation’s communications regulator cuts tariffs, while the market has become saturated with 130 mobile-phone subscribers per 100 people as of end 2013, according to data compiled by Bloomberg.

MTN has cut its prepaid tariff to 0.79 rand per minute, undercutting Vodacom’s 1.20 rand.

“People are worried about this new prepaid tariff of 79 cents,” Craig Hackney, a London-based analyst at NOAH Capital Markets, said by phone on April 25.

“People are worried that Vodacom may need to respond to that and that there is not enough voice elasticity in the market to compensate. It’s probably concerns about them being pulled into a price war.”

 

Streaming Movies

 

Vodacom and MTN are exploring ways to get tablet and smartphone subscribers to use more higher-margin data services as voice revenue slides.

MTN is said to be in discussions with an Asia-based content provider to offer access to streaming movies and television shows to its domestic market, people with knowledge of the talks said last week.

The Independent Communications Authority of South Africa cut the amount wireless-phone companies charge each other to end calls on other networks, also called mobile-termination rates, in half to 0.20 rand on April 1.

A high court ruled that the move was unlawful on March 31, meaning it may lapse after six months.

“There is a lot of uncertainty around” the court’s decision, Hackney said.

The regulator is forced back “to the drawing board,” he said.

Vodacom fell 1.6 percent to 120.99 rand, its lowest intraday level since March 12, by 10:01 a.m. in Johannesburg.

MTN rose 0.8 percent to 211.90 rand. - Bloomberg News


sign up
 
 

Comment Guidelines



  1. Please read our comment guidelines.
  2. Login and register, if you haven’ t already.
  3. Write your comment in the block below and click (Post As)
  4. Has a comment offended you? Hover your mouse over the comment and wait until a small triangle appears on the right-hand side. Click triangle () and select "Flag as inappropriate". Our moderators will take action if need be.

     

Join us on

IOL-Social networks IOL-Social networks IOL-Social networks IOL-Social networks