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Johannesburg - Afrihost, a local Internet Service Provider (ISP) that has aggressively reduced data prices since September 2013, is losing money from its mobile data service and as a result will stop offering the double mobile data for all new clients from this Friday, August 1 2014.
In a letter sent to customers, Gian Visser, Afrihost CEO and founder, said: “We’re losing a fair whack of money every month on our mobile data offering”.
Visser added: “From the time of our mobile data launch last September we knew we would be losing money. And although our first plan was to only offer the double data for six months, we have since managed to extend it a few times.”
He explained why his company’s "plan" included losing money, saying “quite simply we wanted to sell as many mobile gigabytes (GBs) as possible, as quickly as possible”.
“We believed that the more mobile internet GBs we used overall, the more likely we could negotiate better price breaks,” explained Visser.
In September 2009 Afrihost entered the broadband ADSL market, through an initial offering of R55 per GBs that failed to attract a significant number of signups.
At the time it appeared the business model would lead to a disastrous venture, but the company executives decided to use their advertising budget to subsidise their product and re-enter the market aggressively at R29 per GB compared to their rivals’ R70 per GB. The response was amazing.
To take the business forward in 2012, Afrihost piggybacked on MTN, providing its loyal customers with one of the country’s biggest, fastest and affordable growing networks.
A year later, Afrihost launched a revolutionary mobile data service by giving away more than R22m in value to its clients. It slashed Capped DSL data prices to less than R4 per GB.
Today the obvious question is whether this plan actually assisted Afrihost to negotiate better price breaks?
“Yes and no,” Visser answered. “We have got better prices, but they haven’t been quite big enough to turn these savings into break-even.”
Visser urged customers to convince family members, friends and colleagues to take advantage of the double mobile data arrangement before it expires on Friday.
After that the company will stop offering the double mobile data for all new customers.
“This may be the last chance to get double mobile data for a while,” says Visser.
However, Afrihost is extending all the double mobile GBs for all existing customers until December 31.
He added that this will enable the company to get more clients and get closer to price breaks after subsidising the product for almost 10 months.
“The more clients we get, the more mobile data we’ll move overall, the more chance we have of getting better price breaks and the more chance we have of being able to extend the double mobile gigabytes past December,” said Visser.
MTN is buying 50% plus 1 of Afrihost’s shares. The existing shareholders, including management, would retain the remaining shares of the company.
Earlier this month, on July 3 to be precise, Visser took steps to reassure customers about the independence of the business in the wake of the MTN acquisition.
“Nothing will change in the day-to-day operations: My fellow directors and I, and our whole team, are all staying put to keep fighting the good fight to ensure the best prices, the best products and the best value for you and all our clients,” Visser said earlier this month.
