Picture: Bloomberg/Waldo Swiegers
Picture: Bloomberg/Waldo Swiegers

Vodacom will introduce price reductions across all its monthly data bundles.

It will provide free access to basic internet access and essential services, and make prices cheaper for the poorest communities.

SA’s largest mobile operator, with 44-million subscribers, this week reached an agreement with the Competition Commission to reduce its mobile data prices across the board by as much as 40%.

Commissioner Tembinkosi Bonakele and Vodacom group CEO Shameel Joosub signed the agreement at a briefing in Pretoria.

The agreement comes after a two-year investigation. Late last year the competition watchdog demanded that the two dominant mobile operators, Vodacom and MTN, slash internet connectivity prices by 30%-50% or face prosecution.

Rather than fight the commission’s recommendations, Joosub tells the FM, Vodacom chose to be proactive by presenting a plan and reaching an agreement with the authority.

He says the price reductions will result in R2.7bn in additional savings for customers, according to Vodacom’s calculations.

Among a host of changes, the cost of a 1GB monthly data bundle, which has been the subject of much scrutiny by the commission, will fall from R149 to R99, a 34% reduction.

All eyes are now on MTN and Telkom. Bonakele says talks with other operators are still in progress and an announcement is expected within two weeks.

The push for lower data prices is a blow to MTN and Vodacom, which control about 70% of the SA mobile industry. Data has become one of their biggest sources of revenue.

Vodacom annual revenue from data of R24bn accounts for 43% of its SA sales, according to its latest financial results.

That said, the price cuts might not spell total financial ruin for the operator, says Shaun Murison, an analyst at IG SA. The group’s profit margins from data will be negatively impacted, but "cheaper data should help increase volumes which, with allocated spectrum — through rain and when allocated by government — could further help to drive those volumes", he says.

The commission’s findings have also turned the spotlight on the government’s failure to auction spectrum — a radio frequency that allows mobile operators to send voice and data over the airwaves — which mobile operators have long argued is vital to bringing the cost of data down.

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