Comparing contract and prepaid data prices misses one big factor

MyBroadband recently compared the price difference between mobile data on prepaid and on contract.

As expected, prepaid mobile data prices were higher than contract prices.

A 20GB Vodacom prepaid bundle, for example, was 204% more expensive than the equivalent contract.

MTN’s closes prepaid package was 234% more expensive than its 20GB contract.

When asked about the price differences, the networks said the flexibility of prepaid comes at a premium.

24-month contracts offer operators recurring revenue, which Vodacom said allows for more accurate forecasting. It also allows carriers to ensure network capacity is optimally allocated.

Prepaid usage is more difficult to predict, due to its flexible structure.

Product design

Curiously, none of the networks provided MyBroadband with the arguments they made before ICASA when explaining their pricing.

ICASA, which is reviewing the End-User and Subscriber Service Charter, recently completed its public consultations on new draft regulations.

Its proposal includes that prepaid data bundles last a minimum of three years.

During public hearings on the matter, mobile networks said various factors make up the prices of data bundles. Validity periods and out-of-bundle tariffs are two of the variables networks tweak to compete on price.

When comparing contract data packages to prepaid bundles, it is therefore important to consider the underlying tariff plan.

Voice tariffs

Vodacom states in its terms and conditions that it only enables voice services on 12-month data price plans.

Where voice services are available on Vodacom’s data contracts, it charges R1.63 per minute, billed per minute, to numbers on the Vodacom network.

Calls to other networks are R2.03 per minute.

Prepaid subscribers receive the flexibility to make much cheaper voice calls that are billed per second.

Telkom’s SmartBroadband and SmartInternet contract plans are similar, offering voice calls at R2.75 per minute, billed per second.

On its SIM-Sonke prepaid tariff plans, calls to Telkom numbers are 29c per minute. Calls to other networks are 75c per minute.

Free calls to Telkom mobile numbers are also offered when you recharge.

The disparity on MTN’s data contracts is less severe, as My MTNChoice allows you to bolt on voice and SMS bundles in addition to data bundles.

However, MTN’s cheapest voice add-on bundle offers pricing of R1.15 per minute, provided you use the whole bundle.

Its cheapest voice bundle comes in at an effective rate of R1.41 per minute.

This is more expensive than the 79c-per-minute tariff MTN offers on its Pay Per Second price plan.

Price of data contracts

When comparing prepaid bundle prices to data contracts, it is also important to note the differences in features.

If you won’t need voice services much and don’t mind signing a fixed-term agreement, a data contract is a good choice.

Should you need to make voice calls, however, the data contract may end up costing you more every month.

Standard contract tariff plans or prepaid packages tend to offer cheaper voice and SMS services, but at the cost of more expensive mobile data.

Now read: The R21,729 difference between in-bundle and OOB data prices

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Comparing contract and prepaid data prices misses one big factor