SA cellphone prices still expensive

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Johannesburg - South Africans continue to pay more to make a cellphone call than their counterparts in other African countries, even as local cellular network giants such as MTN have now begun to drop prices, new research has shown.

According to Research ICT Africa’s Africa prepaid mobile pricing transparency index for the first quarter, the cheapest local operator’s basket price at $4.90 (R52) is 4.4 times more expensive than the cheapest product in the rest of Africa.

It is 1.7 times more expensive than the cheapest product available from even a dominant in Africa such as Vodafone Egypt or Zain Sudan.

To communicate in South Africa is still more expensive than the cheapest product in Mauritius, Kenya, Ghana and Nigeria.

Alison Gillwald, the executive director of Research ICT Africa, said on Friday that the full study – which is due to be published soon – would also show an improvement in South Africa’s ranking of the price of the dominant operators from 20th to 18th place out of 46 countries that were monitored.

“[South Africa’s] ranking on the cheapest product remained at 8. This continues to suggest pricing pressure on the dominant operators, but in fact Vodacom’s price has not come down since the first quarter of 2013,” Gillwald added.

Her comments came as MTN, South Africa’s second-largest cellular network operator, in a bold move told the market on Friday that it had lodged an application with the industry regulator to convert its new 79c-a-minute tariff for its Pay As You Go customers from a promotion to permanent.

The change of strategy earned praise from analysts whose concerns previously were over MTN’s loss of market share and damaged reputation over the past year because of its slow response to competition from market share-hungry smaller rivals Cell C and Telkom Mobile.

A response from Vodacom now could ignite a price war, the commentators added.

Richard Boorman, Vodacom’s spokesman, declined to comment.

Brian Gouldie, the chief marketing officer of MTN South Africa, said the rate, which dropped two weeks ago, would be permanent from May 7.

“Our customers will require certainty that MTN will maintain the most competitively priced voice tariffs in the industry,” he said.

Whether this rate, which undercuts Cell C’s 99c per minute on and off-net, will find favour with the industry regulator, the Independent Communications Authority of SA (Icasa), is unclear.

Icasa is engaged in a cost study to drop wholesale rates that operators pay to accept the calls on each other’s network with the hope it will lower the costs consumers pay.

Paseka Maleka, the spokesman for Icasa, did not confirm receipt of the application or Icasa’s comment although promising to.

Gillwald noted that MTN’s rate was still pricier than Telkom’s Sim-Sonke 75c per minute off-network and 29c on-net tariff.

Telkom published full-page advertisements to reiterate this in Sunday newspapers at the weekend.

But pricing was clearly not the only concern because millions of customers had not flocked to Telkom Mobile since it introduced the product in September, Gillwald added.

Arthur Goldstuck, the founder of World Wide Worx, a technology research company, confirmed that MTN’s new rate could lower the price advantage for smaller operators, but added that 80 percent of calls were made between the MTN and Vodacom networks.

“What’s happening is that MTN has decided to prove they can be decisive and they can be the first,” Goldstuck said.

But there were two things to consider in a rate: the headline tariff and the effective price per minute, Greg Cort, the telecoms analyst for Old Mutual Investment Group’s Electus Boutique, said.

“It gets very complicated to analyse the price the consumer gets at the end.”

He said MTN’s margins might be impacted in the short term, depending on a response from Cell C, whose profitability could be hurt while it is engaged in a massive infrastructure upgrade.

 

RIA Africa prepaid mobile pricing transparency index Q1 2014 fast facts:

- South Africa’s dominant operators improve rank in pricing from 20th to 18th out of 46 countries.

- Cheapest South African operator’s basket price of $4.90 is 4.4 times more expensive than cheapest product in rest of Africa.

- Cheapest local operator’s basket price is 1.7 times more than expensive than dominant operators (Vodafone Egypt and Zain Sudan).

- Cheapest local operator’s basket price is more expensive than cheapest product in Mauritius, Kenya, Ghana and Nigeria.

Source: Research ICT Africa study


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