Mobile data specials are below cost: Vodacom CEO

In September last year Cell C launched its 21Mbps HSPA+ network, accompanied by aggressively priced mobile broadband offerings.

Cell C launched two prepaid offerings, which included modems, priced at R1,499 for 24GB and R2,999 for 60GB. The company also offered these services on contract for R149 and R299 per month respectively.

Vodacom and MTN were very slow to react, but in April 2011 Vodacom announced their ‘2GB + 2GB’ promotion, offering consumers a 2GB data contract, a 7.2Mbps HSPA modem and an additional 2GB of ‘Night Owl bandwidth’ which can be used between midnight and 5am at R149 per month.

MTN responded by also offering subscribers 2GB of data at R149 per month, with a 21Mbps modem instead of the 7.2Mbps device which accompanies Vodacom and Cell C’s offering.

These three offerings are not only very similar in price and value proposition, but also in the fact that they are offered for a limited period only.

Vodacom stated up-front that this promotion will only last for three months – from 1 May until 31 July – while MTN advertised their special from 1 May to 16 May.

Cell C would also not commit to indefinitely offering its broadband promotion pricing to subscribers, stating clearly that it will be available ‘while stocks last’.

Selling below cost

The reason for the limited period promotional offers appears to be linked to the fact that these prices are below cost. At the recent IIR Broadband Summit in Sandton most of the mobile operators indicated that a price below 10c per MB is not sustainable.

Vodacom’s Jannie van Zyl said that Cell C’s current promotional offering is indeed very compelling, but not sustainable in the long term.

8ta’s Zoltan Miklos concurred with van Zyl, saying that a price of 3c or 5c per MB is simply not sustainable for 8ta.

In a recent interview with MyBroadband, Vodacom CEO Pieter Uys said that while it is complex to calculate the exact cost of delivering a MB of data over their network, their current 2GB promotional price is definitely below cost.

Standard mobile broadband prices still there

Vodacom and MTN have clearly been pushed by Cell C into launching competing mobile broadband promotions, but all of the providers still have standard broadband pricing which is significantly higher than the 2GB for R149 specials.

Cell C’s standard pricing for a 3GB data bundle is R400 (13c per MB), well above the 2GB special pricing of just over 7c per MB. However, Cell C’s standard pricing is still lower than Vodacom’s R349 for 2GB and MTN’s R389 for 2GB.

Vodacom is expected to reduce its standard broadband pricing within the next few weeks, which is likely to force MTN and 8ta to at least match Vodacom’s new rates.

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