Companies / 25 April 2019, 06:56am / Kabelo Khumalo
JOHANNESBURG – South African mobile giants MTN and Vodacom closed yesterday's trading session in the red after they took flak from the Competition Commission, which accused them of charging higher data prices in South Africa than they do in the other territories in which they do business.
The commission also called for sweeping changes that would see the companies forced to reduce their data prices.
MTN, Africa's biggest mobile operator, saw its share price close the session 2.4percent down at R102.25, while rival Vodacom’s stock shed 4.29percent to R115.86.
The commission's head, Tembinkosi Bonakele, said yesterday that it was “disturbing” that the latest tariff report by the Independent Communications Authority of South Africa had shown that Vodacom and MTN’s prices in South Africa were considerably higher than what they charged in other countries.
“On headline data prices, Cell C has historically been more aggressive and yet the two larger networks have found it profitable to not follow their pricing downwards. As a result, it seems that Cell C has recently determined that it cannot win sufficient share by lowering prices and has proceeded to raise them back upwards,” Bonakele said.
“More recently, it has been the turn of Telkom Mobile to be more aggressive on pricing, dropping headline rates well below its rivals. However, the larger networks, especially Vodacom, have not sought to respond with lower headline prices themselves.”
The commission has recommended that carriers must commit to reduce the price of sub-1 gigabyte data packages to “within an objectively justifiable and socially defensible range”.
Minister of Economic Development Ebrahim Patel, in a statement, said that high data-costs could slow down the adoption of new technologies.
“The government would not hesitate to use regulatory power to ensure that a more competitive pricing regime was put in place,” Patel said.
The Competition Commission in 2017 initiated a market inquiry into data services because it had reason to believe that there were features in the sector that prevented, distorted or restricted competition.
MTN SA corporate affairs executive Jacqui O'Sullivan said much had changed in the mobile-data pricing sector in the past 18 months and that the commission's studies appeared to have largely relied on data from 2017.
“MTN’s significant reduction in our out-of-bundle pricing emphasised our commitment to continue driving down the cost of data,” O’Sullivan said.
“We, therefore welcome the opportunity to further engage with the Competition Commission in the coming six weeks on sustainable and balanced solutions to best serve all South Africans and the industry.”
MTN said it was also pleased that the commission recognised the importance of spectrum allocation as a critical lever to facilitate the growth and health of the mobile sector.
MTN said more spectrum would require less capital expenditure, therefore lowering the overall costs to operate and communicate.
MTN and Vodacom have raked in billions in revenue from data, which has, over the past decade, overtaken voice calls as the money spinner for telecoms companies.
A spokesperson for Vodacom said the group was committed to meeting the commission's June 14, 2019 deadline to make further submissions and to provide comment on both the findings and the recommendations in the provisional report.
“Vodacom remains committed to its ongoing pricing transformation strategy to reduce the cost to communicate in South Africa. For example, Vodacom recently announced a significant reduction in out-of-bundle prices by up to 70percent, in addition to fully complying with Icasa’s End User and Subscriber Services Charter.”