MTN promises price increases
MTN South Africa CEO Charles Molapisi has assured shareholders that the company could continue implementing inflationary price increases to grow revenue.
Molapisi mentioned the price increases during his presentation on the second day of MTN’s Capital Markets Day event on 1 June 2023.
His assurances to shareholders that they could continue increasing prices directly contradict South African mobile network operators’ public promises.
As part of their campaign to convince the government and industry regulator Icasa to release precious radio frequency spectrum, Vodacom and MTN promised for years that the extra network capacity would let them cut prices.
Spectrum is the raw wireless network capacity operators like MTN and Vodacom need for their towers to communicate with mobile devices.
After numerous delays, Icasa auctioned off a swath of sought-after spectrum in March last year.
Following the auction, all talk of the price cuts this precious resource would unlock stopped.
MyBroadband asked MTN how it would justify further price increases to consumers, the regulator, and government, but our question was not fielded during the Q&A session.
To be clear: there are several plausible explanations for why South Africa’s mobile operators had to increase prices instead of decreasing them like they promised.
An extract from one of the slides Molapisi presented
Firstly, some of the data price cuts may have been front-loaded as part of a settlement agreement between Vodacom, MTN, and the Competition Commission.
A 2019 Competition Commission inquiry into South Africa’s data services market found that there was scope for price reductions in the region of 30% to 50%.
As part of their negotiations with the competition watchdog, the two operators agreed to cut their prices — with the understanding that they would soon get access to more spectrum.
The operators got their hands on additional spectrum the following year, but not quite how they had hoped.
During the Covid–19 pandemic, the communications minister allowed Icasa to temporarily issue spectrum on an emergency basis to help the networks cope with the influx of traffic due to people sheltering in place.
Icasa’s spectrum licensing process following the auction was structured to allow the operators to migrate out of their temporary assignments with minimal disruption.
As South Africa exited its Covid–19 lockdown, load-shedding got worse — to the point where permanent stage 4 and stage 6 power cuts are “normal”.
MTN mobile base station after being wrecked by thieves trying to steal its batteries
In response to questions, Molapisi said this rapid degradation in South Africa’s power supply caught them off-guard.
He said they believed permanent stage 4 load-shedding would be considered a “force majeure” event.
As a result of Eskom’s decline, South Africa’s telecommunications networks have had to invest heavily in backup power.
MTN has said load-shedding cost its South African business R695 million in earnings last year.
That’s not counting the money it’s investing in backup batteries and generators, the 450,000 litres of diesel it burns per month during stage 5 and stage 6 load-shedding, and the infrastructure that gets vandalized by thieves.
The effects of Covid–19 and load-shedding — including weak economic growth, a weak rand, and high interest rates — could explain the need to increase prices.
However, it would be great to see these effects quantified.
What were MTN’s price projections in 2019 when it reached the agreement with the Competition Commission? How have these been impacted by load-shedding and the poor economy?
Or are they just taking South African consumers for a ride?
Now read: South Africa’s 2G and 3G shutdown plans hit a snag
Loading ...