MTN and Vodacom stumble as regulator calls for price cuts
High data charges hurt low-income South Africans the most
Shares in SA’s biggest mobile operators, MTN and Vodacom, took a hit on Wednesday after the Competition Commission accused them of overcharging consumers, penalising those with lower incomes the most.
The companies charge more for data services in SA than they do in other markets where they operate, according to the provisional findings of the ongoing data services market inquiry.
It said they must commit to cutting prices.
"Lower-income consumers may be exploited to a far greater degree relative to wealthier consumers," said commissioner Tembinkosi Bonakele.
The carriers must commit to reducing the price of sub-1GB packages to "within an objectively justifiable and socially defensible range" of current levels, he said.
Vodacom’s share price dropped up to 5.1% to R114.88, the most in three months, while MTN fell 2.4%.
The two companies had a combined 75-million customers in SA at the end of 2018, equivalent to about three-quarters of the current market. This number includes people with more than one phone.
The high cost of data, which critics of the companies say holds the country back in a global economy increasingly dominated by technical innovation, has been the subject of protests.
Ruhan du Plessis, technology analyst at Avior Capital, said a lack of mobile spectrum was the main driver of data prices.
James Hodge, chief economist at the commission, said data prices were not falling fast enough. He said it was ironic that MTN and Vodacom were charging less for data in other countries than in SA.
Competition Commission chief economist James Hodge talks to Business Day TV about the data services market inquiry’s report
"Vodacom can confirm that, as part of its ongoing pricing transformation strategy to address the cost to communicate in SA, we have reduced the effective cost of data by 34% in the past calendar year alone," spokesperson Byron Kennedy said in an e-mailed response to questions.
MTN said the commission may have used outdated information to reach its conclusion.
"Much has changed in the mobile data pricing sector in the past 18 months.
"The commission’s studies appear to have largely relied on data from 2017, which will not consider changes in 2018 and this year."
Hodge said poorer consumers were more exposed to out-of-bundle pricing, which puts them at greater risk of high prices. More affluent people also had cheaper alternatives because they usually could access free WiFi at workplaces and often had fibre internet access in their homes.
Minister of economic development Ebrahim Patel said that there would be a process of public comment for the next six weeks.