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New mobile moves

Oct 02 2012 07:30 *Arthur Goldstuck

Company Data

MTN GROUP LIMITED [JSE:MTN]

Last traded 222.15
Change -0.64
% Change 0.00
Cumulative volume 2101144
Market cap 410.95bn

Last Updated: 25/07/2014 at 04:34. Prices are delayed by 15 minutes. Source: McGregor BFA

VODACOM GROUP LIMITED [JSE:VOD]

Last traded 125.57
Change -1.54
% Change -0.01
Cumulative volume 596648
Market cap 186.84bn

Last Updated: 25/07/2014 at 04:34. Prices are delayed by 15 minutes. Source: McGregor BFA

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MTN Group [JSE:MTN] and Vodacom Group [JSE:VOD] are planning momentous steps that will change South Africa's cellular industry more than at any time since the arrival of Cell C, and the latter also intends further big moves.

South Africa's major mobile networks are infamous for keeping their plans close to their chest, but just lately they've been playing open cards. That's not a pun on the SIM cards that define their businesses, but they are finally realising that the consumer sees those cards as a commodity item that can be mixed and matched at will.

The churn rate across the mobile networks is around 40%, which means four in every 10 active accounts disappears from the networks every year.

Although most of these users tend to move on to new phone numbers on the same networks, this still represents a high cost as well as lost opportunity. The less actively a customer engages with the network, the fewer services the network is able to sell to that customer.

Of course, price is always the biggest incentive to change networks, as Cell C has demonstrated in recent months. The 99c per minute call rate announced by new CEO Alan Knott-Craig earlier this year electrified the market, and has enabled Cell C to begin growing market share.

The downside is that, while it has been picking up around 700 000 accounts a month, much of this is from churn within the network, as customers opt for a clean start, using the new tariffs.

The net result is about 200 000 new customers a month, and Cell C finally breaking through the 9 million customer mark.

Knott-Craig believes that growth is also likely to come from a source that has been all but neglected: small business.

"The sector of business with 5-20 employees is the engine of the economy, but it's been left out of the loop. There are great deals for corporations and consumers, but no real targeting of the people in the middle. That's on our roadmap.

"Those guys run their businesses on such thin margins, and communications is so paramount to them, yet we haven't done anything about it."

"So what would they want?" Knott-Craig asks before answering his own question: "They want free communication within their business.

"Is it possible to do that? If not free, then damn close. Because their world is not just business; they have another life, they still talk to mom, kids, and others, so they will still spend money there."

Over at Vodacom, a new CEO has also taken the helm, succeeding the much-respected Pieter Uys. Barely weeks into the job, Shameel Joosub, who left Vodacom a few years ago to run Vodafone in Spain, also has big ideas for change.

"You can expect a change in our contract pricing before the end of this year, and on pre-paid early in January," he said during a briefing this week. "We'll make sure all our tariffs are competitive, meaning you'll get great value for the equivalent amount of money."

It doesn't stop there.

"You will see postpaid, data and international calling price changes in the coming months, and different integrated plans being offered," said Joosub.

"We are probably highly competitive by world standards on mobile data prices, but I think we need to push that. So you will see something similar in coming weeks on mobile internet tariffs."

Not to be outdone, MTN also declared this week it was planning to ratchet up its data offering, not on price, but on speed.

Kanagaratnam Lambotharan, chief technology officer at MTN SA, revealed that MTN is "exploring the possibility of switching on commercial LTE network within 2012". LTE stands for long-term evolution, and is usually synonymous with 4G networks that can run at speeds of 40-100Mbps, compared to the current 3G top speed of 21Mbps.

Lambotharan says MTN already has more than 200 LTE base stations ready in Johannesburg, Pretoria and Durban, with a total of 500 expected by the end of the year. This despite delays by both the regulator Icasa and the department of communications in awarding licences for 4G communications.

"Given that South Africa's consumer appetite has tripled, with data consumption up by 200%, and that smartphones usage is up by 128%, the continued evolution of data speeds will bring massive changes to the user experience over the coming years," said Lambotharan.

Less than 48 hours after the MTN announcement, Joosub announced that Vodacom would also launch its LTE service before the end of the year.

The next three months, it seems, will bring bigger changes than we've ever seen in the cellular industry in South Africa.

- Fin24

*Arthur Goldstuck is editor-in-chief of Gadget.You can follow him on Twitter on @art2gee or at www.gadget.co.za.



 
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