VODACOM says it has already reduced out-of-bundle prices by up to 70 percent. Bloomberg
DURBAN – Mobile operator Vodacom has hinted that it could challenge the Competition Commission's ruling on data prices, charging that it was planning to make further submissions to the anti-graft agency.

Vodacom said it would make the submissions within the stipulated June 14 deadline after reviewing the commission's provisional report.

The operator said it had already reduced out-of-bundle prices by up to 70 percent, in addition to complying in full with the end-user and subscriber services charter issued by the Independent Communications Authority of South Africa (Icasa) last year.

“These initiatives have resulted in a 34 percent decline in average data prices in the past calendar year and a 57 percent reduction in average data prices in the past three years,” the group said.

Last week, the commission accused Vodacom and MTN - the country's largest mobile operators - of charging higher data costs in South Africa than they did in other territories in which they did business.

The commission ordered them to slash the prices immediately.

Peter Takaendesa, a portfolio manager at Mergence Investment Managers, said the order would have far-reaching implications for Vodacom’s and MTN’s bottom lines.

“Vodacom and MTN could argue that the cost of providing data services has remained high in South Africa and they deserve to charge a premium relative to peers in South Africa, due to higher investments into their networks. But the key question is how sustainable are those prices in the face of tough consumer conditions and the growing need for internet usage? The growing public and related regulatory voices about high data prices suggest the current situation is not sustainable,” Takaendesa said.

The commission confirmed recent observations and findings that the cost of data services is high in South Africa relative to peer countries.

Icasa welcomed the commission’s provisional report that data costs in the country should be reduced.

“Icasa’s recently published tariff analysis report also confirmed that MTN and Vodacom charge higher prices for the 1GB and 3GB data bundle at R149 and R299 respectively,” it said.

Takaendesa said the key factors that kept data prices high were ineffective competition, due to the dominance of the MTN and Vodacom, delays in the licensing of relevant spectrum, and complex product pricing offerings in the market.

He said Telkom and Rain had improved the consumer's understanding of products in the market.

Takaendesa said market dominance and spectrum availability were likely to be resolved in the long term.

“This must be the reason the Competition Commission has requested the mobile operators to voluntarily commit to providing immediate price relief, particularly to low-income consumers. Coming up with new regulations or initiating a formal investigation of excessive pricing will take time. It is clear that data prices are relatively high in South Africa, and the allocation of new spectrum should take into account the market structure and how that will contribute to lowering data prices over time.

“However, all the regulatory interventions also need to carefully balance the level of data prices that provides relief to the consumer and prices that leave the mobile industry in a sustainable condition,” Takaendesa said.

Vodacom declined 0.08 percent on the JSE on Monday to close at R118.08.