MTN has dropped the price of its 1GB monthly data bundle from R149 to R99. Picture: REUTERS
MTN has dropped the price of its 1GB monthly data bundle from R149 to R99. Picture: REUTERS

Recent mobile data price cuts by the country’s largest mobile operators may not be enough to make internet connectivity truly affordable for all South Africans, say analysts. 

Telecom operators have recently reduced data prices after a two-year investigation by the Competition Commission found that internet rates for prepaid packages were too high.

After an announcement in March that it will drop data prices for its 30-day bundles by up to 50% from mid-April, on Thursday MTN reached an agreement with the commission to reduce its mobile data prices from May 1. This follows similar agreements with Vodacom, Telkom and Cell C.

As part of the agreement, the cost of MTN’s 1GB monthly data bundle, which has been the subject of much scrutiny by commission authorities, will fall from R149 to R99.

Arthur Goldstuck, MD of technology market research firm World Wide Worx, said these price cuts are “a good start, and one cannot dismiss a 33% rate cut as a token. Small data bundles have been cut by up to 40%, which makes a significant impact on the affordability of data.”

However, “this still does not address the need for truly low-cost data for the poor”, he said. 

Goldstuck said data prices have been falling for many years for those who can afford large bundles. “Now it is falling for those further down the spending chain,” though “it still needs to reach the bottom of the pyramid, namely those who perceive themselves as being able to use data only on an ad hoc basis, don’t believe they can afford large bundles, and therefore use data off their airtime, which remains expensive.”

Mobile operators are expecting margins to take a hit because of the price cuts.  

MTN has 29-million subscribers on its network and has been working to grow its data revenues. For the financial year to end-December 2019, MTN made R12.6bn in revenue from its data services in SA. 

Ofentse Dazela, director of pricing research at  information communication technology consulting company Africa Analysis, said as mobile operators are not transparent about their input costs, such as how much it costs to deliver a gigabyte of data, “then the next logical yardstick is [to] look at revenue numbers reported to assess whether the price cuts are acceptable, although revenue numbers alone only tell half the story”.

Vodacom, SA’s largest operator, cut mobile data prices by up to 40% from April 1.

Dazela said is is obvious that larger mobile operators “have only moved as far as matching their data offerings to that offered by small operators in the market that have been pushing price wars”. To that extent, there is still more room for data prices to fall in the local market, he said.

With mobile operators having been pressured into making concessions, regulators and legislators must also shoulder part of the blame. 

As far as operators are concerned, “the issue regarding perceived high data prices should be blamed on our policymakers who for years showed lack of political will to create an enabling environment for them”, said Dazela.

The government should expedite the permanent allocation of spectrum, which operators have long argued as a reason for high data prices over the past decade, he said.

Goldstuck said the commission and the mobile network operators had failed in one regard: while they had declared a range of predetermined sites and services as zero-rated, they had failed to create a unified pool of these sites.

Instead, each operator had created their own independent set of zero-rated sites. This means one of the main benefits of zero-rating, which is to provide free access to educational resources, cannot address the need or potential of schools to offer their students access to free educational material, he said.

Because every subscriber has access to a different set of sites and services, a school cannot mandate use of specific free services, and only those schools whose students can afford commercial access are able to take advantage of online teaching, said Goldstuck.

If this is addressed, the only barrier to entry becomes the device itself, and that is far easier to address than the combination of complexity of access and disjointedness of resources, he said.

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