Prepare for online 'value war'

Johannesburg - It's not entirely a price war, but something that probably could be called a "value war".

This is what is brewing in the telecommunications industry and what could probably be of considerable benefit to consumers buying data for internet usage over the next few months.

Just such a "value war" gathered momentum in the data sector over the past week when MTN Business, an MTN fully owned subsidiary supplying internet services to business, made an important announcement regarding its data offer.

An MTN Business client with at least a two mega bits per second (Mbps) port will be able to get 50% more bandwidth at no additional cost.

Although this does not mean a direct cost reduction, it does mean that these clients will get much better bandwidth value for the same price.

But what makes this offer really interesting is that some of MTN Business's clients are themselves smaller internet service providers (ISPs), who would probably do whatever is required to survive.

According to Arthur Goldstuck, the managing director of World Wide Worx and a telecommunications analyst, in the coming three to six months there could be an intense price war between the smaller ISPs as prices indeed come down in a highly competitive environment.

"If these ISPs with 50% more bandwidth cut their prices by 20%, they will still have a higher profit margin," he says.

Goldstuck reckons that the other big players will probably have to respond to the MTN Business offer, at least as far as adjustments are concerned - such as more data for the same price and more flexible data packages.

In his view the bigger players will however have to be more careful about reducing prices because of the risks attached to a price war.

"But it would be a good strategy for one big player to decide to break away, declare a price war and begin to reduce its prices. The others will have to follow."

He reckons that consumers would regard such a player a hero. But so far there have been no indications of any dramatic step such as this.

Other players that have made early adjustments to certain data packages include Telkom and M-Web.

Earlier this year MTN and Vodacom improved their data offer to ordinary consumers when they extended the period within which data bundles must be used.

Goldstuck says research indicates that if data becomes cheaper usage increases.

This looks like the beginning of considerable changes in South Africa's data industry, mainly thanks to planned new telecommunication infrastructure such as international undersea data cables and new domestic fixed-line networks.

MTN Business, which recently came into being from a merger between MTN Network Solutions and Verizon Business South Africa, can make this offer because the group has now combined two networks into a single big one. This has produced extra data capacity and improved efficiency.

"We are looking forward to further changing the landscape next year, but are currently studying ways to give our clients a competitive advantage," says Angela Gahagan, head of MTN Business.

She declined to disclose the names of any of the business's ISP clients, for reasons of confidentiality.

According to her, MTN Business is ready to become a catalytic agent for competitiveness in the industry.

- Sake24.com

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