Why should contract customers pay for CLIP

My argument then still stands that a contract client with a top-up plan will pay again for CLIP should they top up during the month.
 
Captain-Justice said:
My argument then still stands that a contract client with a top-up plan will pay again for CLIP should they top up during the month.
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With TopUP the "Airtime" you get is a lot cheaper than if you had to buy it separately though.

Did you do any research at all?
 
Sinbad said:
Prepaid call rates are pretty much lower than contract call rates nowadays. So how are prepaid customers paying for it?
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Yip, I think Arthur should accept that contract customers subsidise prepaid.
 
It just doesn't make sense to be on contract anymore which is why I'm reverting to prepaid at the end of this month.

Getting phones on contract really doesn't save you anything these days so it's just best to buy whatever you can in cash and use the much cheaper prepaid service.

Contract used to be something you wanted because of the convenience, but with unnecessary charges, exorbitant OOB's and so forth, it just makes sense to go prepaid.
 
sajunky said:
Yip, I think Arthur should accept that contract customers subsidise prepaid.
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I think Arthur knows that postpaid contract subscribers subsidize prepaid subscribers in the current market, a few years ago when prepaid rates where significantly higher than postpaid - remember the early days of Vodago. IIRC it was R2,85 a minute back in 1999 and postpaid was sub R2 a minute. The reason prepaid prices have plummeted is because of the dynamics of the market, it is the same as why you pay less for vegetables at a spaza shop than at Woolworths but more for most goods at a spaza shop than at a supermarket.

I have an idea that the MNOs have found themselves in a situation where the postpaid market spend more time initiating calls than receiving calls so the revenue off a customer (as opposed to the revenue from the customer) and because of CellCs regulator driven strategy of lowering prices to the lower LSM bracket we have had a price war on the prepaid market with lag on the postpaid market, postpaid poorer customers are far more discerning than the guy wanting an iphone and being prepared to pay whateverhundred rand Vodacom offers a contract for.

In the medium term if I was an MNO I would be very worried about loosing higher ARPU customers because of a substitution from postpaid contract to prepaid which in the medium term will not be buttressed by the handset draw card. In my opinion it is a bigger threat than the CTR issues
 
sajunky said:
Yip, I think Arthur should accept that contract customers subsidise prepaid.
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No, I don't accept that - for one simple reason: The MNOs are still making a profit on prepaid.

If prepaid was being sold at below cost, then you could say that postpaid is subsidizing prepaid.

But I don't believe that's the case.

The word subsidize actually has a specific meaning.

For MNO's, the call margin on prepaid is presumably lower than on postpaid, since it seems their revenue per call is much lower - but that's just a working assumption since we don't really have detailed insight into their cost structures and cost allocation models. Sure the end-user is charged far less on prepaid ... or seems to be. But do we really know how the revenues and costs are allocated? No.

Even so, I really do not believe that the MNOs are running their prepaid business below cost, making a loss on the prepaid business. Have they said so? Why are people assuming that prepaid is sold below cost?

If not, then you cannot say that postpaid subsidizes prepaid. They both make a profit. Different profit, perhaps. But real profit.
 
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ginggs said:
Prepaid users can also get a replacement SIM for R0.99, what do contract users pay? R99.00?.
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According to a Vodacon employee, if you are a contract customer, you can also buy a 99c sim at CNA or wherever and just have it ported to your contract...
 
P924 said:
According to a Vodacon employee, if you are a contract customer, you can also buy a 99c sim at CNA or wherever and just have it ported to your contract...
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This is a trick which worked for me in the past.
99 Rands, Sir! - I'd like to use this??? (Presenting unopened starter pack) - OK, no problem.
 
sajunky said:
This is a trick which worked for me in the past.
99 Rands, Sir! - I'd like to use this??? (Presenting unopened starter pack) - OK, no problem.
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Does that trick work for a replacement SIM, i.e. sim swap?
 
ginggs said:
Does that trick work for a replacement SIM, i.e. sim swap?
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That was when signing a new contract. It worked every time. But now SIM has no preloaded number, it would work, I think.

Edit: I didn't want to save on SIM. This was before rica and SIMs had preloaded numbers. I wanted that number. I was surprised of not being charged for SIM, next time it was intentional. :)
 
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Arthur said:
No, I don't accept that - for one simple reason: The MNOs are still making a profit on prepaid.

If prepaid was being sold at below cost, then you could say that postpaid is subsidizing prepaid.

But I don't believe that's the case.

The word subsidize actually has a specific meaning.

For MNO's, the call margin on prepaid is presumably lower than on postpaid, since it seems their revenue per call is much lower - but that's just a working assumption since we don't really have detailed insight into their cost structures and cost allocation models. Sure the end-user is charged far less on prepaid ... or seems to be. But do we really know how the revenues and costs are allocated? No.

Even so, I really do not believe that the MNOs are running their prepaid business below cost, making a loss on the prepaid business. Have they said so? Why are people assuming that prepaid is sold below cost?

If not, then you cannot say that postpaid subsidizes prepaid. They both make a profit. Different profit, perhaps. But real profit.
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In the current market if MTNs submissions to the court and the group financials are to be believed their postpaid subscribers are subsidizing the prepaid market when you incorporate the capital expansion expenditure according to anticipated usage base (number of seconds it will be used prepaid and postpaid).
The difficulty that arises is that current subsidization is more than covered by historic profits and long term profits but competition concerns surface more importantly I don't believe costs for network expansion (as opposed to maintenance) should feature in determining cost.
Double check the financials presented on the group and you'll see the strain the change from prepaid as a cash cow has had.
 
I don't doubt that they're taking huge margin strain. In the end this is accounting and high finance. It really depends on how you wish to allocate costs, and how you apportion and amortise across the business lines and revenue streams.

If any MNO avers that their revenues on prepaid products are running below cost I'd like to see the detail, and that is something we just don't have in the published figures. And neither should we. It's their business to run, and it's a single business. They have every right to make those allocations according to their lights, always within the law and GAAP (or whatever it's now called).
 
O generally agreed especially with respect to the fact that the manner of allocation is of such great importance

where it gets a little messy though is that the MNOs make averments about their pricing model as part of the regulatory system - particularly in the context of wanting to compel other operators to provide certain services on a "cost" basis (or "cost plus") which is generally nonsense. As I see it if an operator goes that direction today they can be held to it tomorrow
MTN SA don't like that standard ...
 
Spot-on.

I'm with you completely that it's the regulatory system itself that distorts the way MNOs report their costs. They have every incentive to allocate in ways that mask real margins in the socially/politically sensitive segments.

Yet another example of how the State's heavy hand disfigures the market. It is Caesar who gives us a duopoly (and a minnow). And in the end it is Caesar who protects their margins by protecting them from real competition. And when Caesar's bureaucrats and magistrates involve themselves in the arcane details of accounting practices and technology decisions (like LLU to name but one), we return to Byzantium, with a baroque twist.
 
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the question though is the best means to lower that hand without creating a new heavy cartel hand (and I am not referring here simply to the presence of a limited number of participants but rather the existence of enterprises deploying fraud or violence) stepping in in some shape or form

the move from a regulated industry to a free market has seldom been served well by "shock" or by "managed liberalization" instead it seems a strange course of accidents is needed
 
Shock doesn't work well at all, I agree. USSR is a case study of how thugs become billionaires. Despite all the moans, many justified, Judge Green did a pretty good job as deregulation czar in dismantling Ma Bell. Perhaps we need a similar approach in SA, appropriately scaled? Liberalisation with an English s and not an American z, if you get my drift.

Which brings us back to CLIP in prepaid. I'm willing to wager a barrel of the best that all the operators include the CLIP costs in prepaid in their detailed costing disclosures to the regulator.
 
bizarrely in many respects the most successful - as opposed to aggressive - deregulator was Carter
the great regulatory overlay being Clinton ... and don't even start on Johnson

Thatcher and Reagan both deregulated aggressively and allowed zones of regulatory capture
 
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