“Vodacom and MTN are ripping South Africans off”. This is the view of many people who pay R99 for 1GB of prepaid data.
The perception that Vodacom and MTN are charging too much for data is so pervasive that it sparked the social movement #DataMustFall.
This movement gained so much momentum that it resulted in parliamentary hearings and investigations by ICASA and the Competition Commission into mobile data prices.
Last year, the Competition Commission released its Data Services Market Inquiry report, saying there is scope for Vodacom and MTN to cut their mobile data prices by 30% to 50%.
The Commission further said all mobile operators must offer South Africans on prepaid packages “a lifeline of daily free data”.
Consumers rejoiced. After all, there is no sympathy for these two telecoms giants which have been making billions in profit.
Vodacom and MTN subsequently reached an agreement with the Competition Commission to reduce their data prices.
Following Vodacom’s price cut announcement, many consumers complained this was still not enough.
Telkom’s executive of regulatory affairs Siyabonga Mahlangu climbed in, saying Vodacom’s prices after the latest cuts are still far higher than theirs.
Vodacom CEO Shameel Joosub hit back, saying they charge more than Telkom for mobile data because they offer a superior service.
“Telkom’s positioning has always been to try and be the cheapest. Ours is to give the most value and provide a quality service,” said Joosub.
The Vodacom CEO said their value proposition is a balance between coverage, speed, price, and service.
Joosub is right – this is how a competitive market works.
The incumbents typically charge more for quality products, while newcomers try to wrestle market share away from them through lower prices.
The table below provides an overview of what Joosub described in terms of quality and price.
|Network Operator||Network Quality||Coverage||Average Speed (Mbps)||Price|
Network investments – capital expenditure (capex) – provide a good indication of the network quality and coverage of mobile operators.
Vodacom and MTN’s capex dwarfs that of Cell C, Telkom, and Rain’s, which means that Vodacom and MTN have far better coverage and network quality.
These network investments also benefit smaller operators. Cell C and Telkom can offer their subscribers country-wide LTE coverage thanks to roaming agreements they have with MTN and Vodacom.
Rain, in turn, benefits from Vodacom’s large network investments through an agreement which is helping it to roll out a 4G network.
The chart below compares the network investment of the four major mobile operators in South Africa. Rain does not report its annual capex.
You have a choice
Companies should be allowed to build a business model which they believe will create a sustainable business. This is how a free market works.
If Vodacom and MTN want to build world-class networks and charge consumers high prices to use their networks, it is their choice.
If Rain decides to only provide coverage in selected areas, and not have battery backup during load-shedding to save costs, it is also their choice.
The most important thing is that consumers have a choice. They must be able to choose the service or company which suit their needs.
This is the case in South Africa. Consumers can choose Vodacom or MTN’s high-quality services at higher prices or opt for Telkom or Cell C’s more affordable products.
People also have a choice between affordable big data packages on 24-month contracts or less affordable prepaid products.
They can even get an affordable, unlimited mobile data package from Rain for R479 per month.
The mobile operators are also, for the most part, good at telling consumers what they get. This means there are no surprises.
For example: If you buy 1GB of prepaid data which lasts for a month, that is exactly what you will get.
So, if you are not happy with the product from one of these companies, choose another product. Or choose another provider. It is up to you.
What does not make sense is complaining about a company, but when it comes to spending your hard-earned cash you still choose them as your preferred provider.
This is an opinion piece.