Despite regular reports of fraudulent subscriptions and incorrectly-debited airtime balances, major South African mobile operators continue to allow Wireless Application Service Provider (WASP) billing on their networks by default.
A recent industry investigation found that airtime theft was occurring on a mass scale from Vodacom’s prepaid customers, with fraudsters using a gateway developed by the mobile operator to bill victims.
The investigation, which involved hundreds of thousands of SIM cards across all networks, showed fraudulent WASP billing on a large number of Vodacom prepaid SIMs.
Vodacom said it rejects allegations that it is allowing its customers to be fraudulently billed by WASPs.
However, the mobile network said that it would not block WASP billing by default as this is not the industry standard.
“Similar services around the world, such as Apple iStore and Google Play, are active by default and provide customers with the convenience of paying for content services and subscriptions without having to continually re-enter credit card/payment details,” Vodacom said.
“Through the Vodacom payment platform, for example, customers can subscribe to the likes of Showmax, Deezer, and Office 365 in addition to hundreds of games, sport, and small business services.”
It is important to note that when a WASP bills a customer through a mobile network, whether it is for a subscription service or a premium-rated SMS, the operator receives a portion of the amount billed.
In some cases, this amount can be a significant portion of the total cost of the service.
Premium-rated SMS payouts
Using premium-rated SMS charges at an example, it is apparent that South African mobile operators take the lion’s share of the total amount charged to the consumer – at least at the lower cost levels.
Premium-rated SMS services allow WASPs to offer services to mobile customers which are accessible by a once-off SMS at a premium rate that is paid in airtime.
For example, a mobile subscriber could send an SMS with a specific string of text (a shortcode) to a certain number to receive a list of cat jokes. This SMS would be billed at a set price, which for this example we will assume to be R1.00.
At this SMS cost, the mobile network pockets up to 97c, leaving the WASP with a meagre portion of the full charge.
The WASP’s share of the revenue does improve with the cost of the premium-rated SMS, but this depends largely on the mobile operator.
On average, Cell C takes the biggest cut of the SMS cost, followed by MTN, Telkom, and Vodacom, who all take similar cuts.
It should be noted that Telkom disables WASP subscription billing by default on its network while Vodacom and MTN do not, but it still allows for premium-rated SMS billing.
The table below, which is based on the payout splits offered to WASPs by Vodacom Messaging, shows how much each mobile operator keeps of the total charge for premium-rated SMSs.
Vodacom Messaging details how much each network pays it for each SMS charge, which it then uses to determine how much it pays to the WASP that is using its Premium SMS service.
From this, we can determine the cut taken by each mobile network in the case of this provider, which we have detailed below.
|SMS Cost||Vodacom’s Cut||MTN’s Cut||Cell C’s Cut||Telkom’s Cut|
As mobile operators enter into pricing agreements with Premium SMS service providers on a case-by-case basis, this split may vary depending on the provider.
For example, Vodacom Messaging may be charged less by Vodacom than it is by MTN.
However, the data above gives a good idea of the general trend with regards to how much the mobile network operators make per premium-rated SMS.
The full PDF detailing Vodacom Messaging’s Premium SMS service is available on the provider’s website and embedded at the end of this article.
Mobile networks silent on pricing
MyBroadband reached out to all four mobile operators for feedback on why their prices are structured this way.
Cell C and Telkom said they were unable to provide pricing information as it is confidential.
“We are bound to confidentiality by our commercial agreements with our partners as the information is market sensitive,” Cell C said.
“Unfortunately, Telkom cannot confirm nor disclose price information, this is confidential information between Telkom and its service providers,” Telkom said.
MTN said that it has a revenue share model that is agreed upon by both MTN and its partner, which is paid per tariff and the percentage paid to the WASP increases with the higher tariffs.
“MTN takes the majority of the SMS cost at lower payment levels because there is a cost associated with each SMS,” MTN told MyBroadband.
“Costs include staffing costs, platform costs, and licencing cost.”
“We’re not at liberty to share more information on this matter due to competitive reasons,” MTN said.
Vodacom said it was unable to disclose its commercial agreements.
“Vodacom is contractually precluded from discussing commercial agreements we have with service providers,” Vodacom said.
“Contracts are negotiated on a case-by-case basis, which means tariffs of this nature are not necessarily standardised.”