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Data won't fall if providers' costs don't fall, inquiry hears

Oct 18 2018 18:00
Canny Maphanga, News24

Mobile service providers are sticking to their guns in various submissions which indicate that the sentiments across the board remain the same: data prices in South Africa are competitive and cannot be offered at a lowered flat rate due to constraints and cost factors.

This was revealed at the second day of public hearings into the Competition Commission's Data Market Inquiry on Thursday in Pretoria, where the cost of data across all mobile service providers in South Africa has come under scrutiny.

On the agenda were four key service providers that influence or contribute towards the price of data in South Africa: MTN, Vodacom, Telkom and Cell C.

The inquiry follows discontent among consumers, with the price of data across the country documented in the hashtag "Data must fall".

Other countries on the African continent enjoy cheaper rates.

The Competition Commission’s role, in summary, is to examine what "factors or features of the market and value chain may cause or lead to high data prices and to make recommendations that would result in lower prices for data services".

Vodacom: Cheaper bundles, shorter rate

The most popular reference for high data costs is the Vodacom 1GB bundle.

While the service provider cannot yet lower the cost of its R149 (30-day) bundle, it does offer an alternative.

"Vodacom responded by introducing weekly, daily and hourly data bundles, priced at R12 for 1 hourly GB. The personalisation of data bundles is a huge success and has changed the profile of our business quite significantly. Customers love this," Vodacom CEO Shameel Joosub told the commission.

The service provider's greatest conflict is that in order to lower data prices, the cost must be lowered.

"I think that pricing can and should come down, but you need to take cost into perspective. For prices to drop your cost to carry must drop: If you have a cup and want to sell it, you need to drive the price of manufacturing the cup down in order to make it cheaper," he explained.

The question to Vodacom by consumers was: how can the same data services used by South Africans be offered at a cheaper price in other African countries?

"We have countries where we have lower prices, but that is a country where there is lower level of investment by Vodacom. You can drop the price, but you will have terrible service," Joosub responded.

MTN South Africa: Data prices are competitive

MTN believes data prices are competitive with the current conditions in the South African market.

“There are 6 players but MTN and Vodacom are the strongest players however we are still able to compete. Vodacom has double the profits MTN has in South Africa, we are not similar,” CEO of MTN Godfrey Motsa told the commission.

MTN appealed with commission to not “over regulate” as it cannot waste any more time.

"We believe regulation is necessary, but please don’t over-regulate this industry. license 5G spectrum now - the world of technology will not wait for us," Motsa said.

"The reality is that South Africa is an African leader for data and device affordability based on average income affordability, but it is hampered by extreme income inequality," he added.

Telkom: Introduce more competition

Telkom is the only service provider that has successfully been able to maintain the lowest price of the 1GB (30-day) bundle, which sits at R100.

"Mobile is the most widespread means of accessing data services in South Africa. Telkom offers significantly greater value for money than Vodacom and MTN," Group Chief Executive of Telkom, Sipho Maseko, told the commission.

Telkom believes that the only remedy for high data prices is to introduce more competition by allowing smaller players to compete with the key role players.

"Our view is [that] to promote competition is important. Part of the challenge is: how do we deconcentrate the economy and have more competition that can drive growth? Customers deserve better service and more options," Maseko submitted.

Cell C: Increasing competition is the only solution

Cell C is of the view that effective competition is the only solution to the high cost of data in South Africa.

"MTN and Vodacom maintain duopoly with exclusive access to prime sites and land on a long-term basis," CEO of Cell C, Jose Dos Santos, told the commission.

Dos Santos further said that although Cell C enjoys 12-13 % of the market share, MTN and Vodacom still dominate the sector.

"MTN and Vodacom together hold more than 80% of the market, 18 years after Cell C was launched," Dos Santos added.

The service provider's submission is that the introduction of pro-competitive regulation is the solution that the duopoly (MTN and Vodacom) fear the most as competitors will be able to gain market share.

The commission will publish a report of the data market inquiry once it concludes on Friday.

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mtn  |  cell c  |  vodacom


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