The 10c per MB mobile data barrier

Vodacom CEO Pieter Uys said that a very efficient mobile network is needed to make mobile data prices of lower than 10c per MB sustainable.

There are currently numerous mobile data promotions available in the South African market offering data bundles of well below 10c per MB. The best priced mobile data bundle – 8ta’s R199 for 10GB – offers data at 2c per MB.

However, the sub 10c per MB pricing is only associated with mobile data promotions. The pricing of standard data packages from the mobile operators is typically well above 10c per MB.

The 10c per MB barrier

In March 2011 Vodacom’s Jannie van Zyl said that Cell C’s data promotion at the time, which offered mobile data at between 3c per MB and 7c per MB, was compelling but not sustainable in the long term. Van Zyl accurately predicted that Cell C would revert back to higher prices after their promotion ran out.

At the time 8ta’s Zoltan Miklos concurred with van Zyl, saying that a price of 3c or 5c per MB is simply not sustainable for 8ta. Miklos said that they need to recover the costs of rolling out a mobile broadband network, which makes very low mobile data prices infeasible.

Jannie van Zyl
Jannie van Zyl

Van Zyl said that consumers may see aggressively priced data promotions, but (again accurately) predicted that standard mobile data prices will not fall to below 10c per MB in the foreseeable future.

It is interesting to note that van Zyl is behind many of Vodacom’s mobile data promotions where, in one case, data prices were slashed to 2.4c per MB.

Data is sexy

Cell C CEO Alan Knott-Craig said that consumers can expect data promotions to continue, partly because data is a ‘sexy’ product which is often subsidized by voice revenues. “Data is a sexy product, and you have to make sure you offer the latest technology and products,” said Knott-Craig.

Is the cost of providing delivery a MB of data over a mobile network is indeed higher than 10c per MB as many cellular executives suggest, Knott-Craig may be correct that the continued data promotions are subsidized products to attract new subscribers and create hype.

Uys’ feedback suggests that this is the case. The Vodacom CEO previously told MyBroadband that their 2GB for R149 data promotion was below cost.

The cost can come down with better network technology and lower input costs, but it seems like the 10c per MB barrier will not be easy to break.

“As volumes increase and we invest in things like self-provided transmission, we are able to support lower data prices. Having said that, to support a sub 10c per MB level we need to ramp up the work we are doing in the network,” said Uys.

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The 10c per MB mobile data barrier