Johannesburg - There’s a price war raging between South Africa’s cellphone
networks after Cell C lowered the rates of its prepaid calls by more than 34%.
Last Thursday, Cell C, the third most popular cellular
network provider, announced a new product – 99 Cents for Real – with which
users can phone any network at any time for 99c a minute. The cost of the calls
is measured per second.
It took Vodacom Group [JSE:VOD] only a few seconds,
literally, to strike back with its Freedom 99 product, which also offers calls
to any network for 99c a minute. But unlike Cell C’s offer, its cost of calls
is measured per minute.
These price cuts mean that prepaid users pay less than
contract users pay.
Cell C is planning to correct this situation with lower
contract fees, says Cell C chief executive Alan Knott-Craig.
“We have already devised new, cheaper contract products
which will be introduced in the next few months,” he said.
The purpose of the price cuts, Knott-Craig says, is not to
start a price war, but to extend Cell C’s market share. “Lower prices are one
way of achieving this.”
He says the price cuts were done in anticipation of lower
interconnection rates to be prescribed by the Independent Communication
Authority of South Africa (Icasa).
The interconnection rates are the amounts that networks pay
one another to handle each other’s calls. These were recently reduced from 89c
a minute to 73c a minute by Icasa. By next year, they will be down to 40c a
Vodacom spokesperson Richard Boorman says their network has
no immediate plans to reduce contract prices.
“But our prices are constantly being revised to ensure we
remain competitive,” he says.
Vodacom’s Freedom 99 product has been available since last
Boorman says the product also offers free calls between midnight
Arthur Goldstuck, managing director of research company
World Wide Worx, says the price cuts are among the biggest in the past decade.
“The reductions are impressive,” he says. “In addition, the
products have been made as simple as possible so that users know exactly how
much they are spending when they make a call.”
No distinction is made between networks or peak times, and
the rate is charged according to a fixed time, says Goldstuck.
He adds that it’s logical that contract rates will have to
be lowered in order to keep valuable contract customers happy.
Goldstuck says he thinks Cell C lowered its prepaid prices
firstly to make it easier for the prepaid market to move over to Cell C, which
would allow it to gain market share.
AppChat founder John Holdsworth says prepaid users should be
excited about the lower prices. “Users have in the past had very little faith
in cellphone companies because they pay hopelessly too much for cellphone
“Cell C’s announcement is the first step towards regaining
users’ confidence. I hope users will reward Cell C’s vision and courage by
switching to Cell C.
Alison Gillwald, director at Research ICT Africa, says there
is a direct link between lowering the cost of calls and lower interconnection
In other countries, like Namibia and Kenya, the lowering of
interconnection rates also ledt to a cut in call fees, she says, adding: “The
result is more subscribers phoning for longer, which ultimately translates into
According to Gillwald, calls in South Africa were very
expensive before these recent price reductions. A study by Research ICT Africa,
released last month, reveal that South Africa is ranked 19th on a list
comparing call fees in Africa.
MTN Group [JSE:MTN] and 8ta, which are owned by fixed-line
operator Telkom [JSE:TKG], have so far refused to join in the price war. MTN
spokesperson Serame Taukobong says their customers “could rest assured” their
prepaid rates are still the most affordable in the market.
MTN offers free calls at certain times of the day. “We
believe our competitors’ prices are uncompetitive because they are not based on
our clients’ use of the network,” says Taukobong.
8ta chief executive Amith Maharaj says their prepaid rates
are affordable, bearing in mind that their customers get additional free
airtime when they make calls.