Banking9.10.2024

New South African bank’s fight against Capitec

Old Mutual has launched a mobile virtual network operator (MVNO) that has cloned Capitec Connect’s aggressive data pricing strategy.

Although it hasn’t named its main rival directly, Old Mutual has made no secret of its ambitions to go after Capitec’s customer base. Old Mutual Connect is its latest shot across Capitec’s bow.

The financial service provider plans to launch its new bank, OM Bank, before the end of 2024.

It will target the upper mass market and lower affluent customers who earn between R5,000 and R80,000 per month.

This is the segment where Capitec has seen tremendous success, rapidly growing to serve over 20 million customers since its launch in 2001.

Even though OM Bank has not yet launched, Old Mutual recently revealed it already has a million customers for its transactional banking capability.

Bidvest Bank currently administers its Money Account, but this will change before the insurer and investment service provider’s new bank is launched.

To compete against the established bank, Old Mutual said it would leverage the existing 3.1 million lower-income South Africans served by its Mass and Foundation insurance cluster.

This cluster serves low-income and lower-middle-income individuals, who typically earn between R1,000 and R30,000 per month.

Earlier this week, Old Mutual announced the launch of an MVNO, promising that it will offer competitive mobile services that will transform mobile connectivity in the lower-income market.

“Affordable data and reliable connectivity is critical for our customers in the Mass Market to fully participate in the mainstream economy,” stated incoming OM Bank CEO Clarence Nethengwe.

“It is also an important enabler for our customers to interact with the rest of our propositions digitally.”

MyBroadband bought a SIM for the new MVNO from a local Old Mutual branch and found that its data prices are an almost complete clone of Capitec’s.

Its cellular service provider also runs atop Cell C’s MVNO platform — like Capitec.

However, there are several key differences between the two products.

Firstly, Capitec’s main draw card was offering data that doesn’t expire.

In practice, it allows customers to buy data with airtime at a highly competitive out-of-bundle rate of 4.5 cents per megabyte, or R45 per gigabyte.

For monthly data consumption of 1GB or less, this was excellent value. However, for 5GB and greater usage, Capitec’s offering was lacklustre compared to traditional mobile operators and other MVNOs.

To address this, Capitec launched 2GB, 5GB, and 10GB data bundles.

Old Mutual, on the other hand, seems to be offering the same starting prices as Capitec — but as bundles customers must buy.

Its prices for 5GB bundles and lower appear to be calculated on a flat 4.5 cents per MB basis.

Whether you buy 30MB or 5GB, your effective data rate remains 4.5 cents. In other words, there is no real incentive to buy larger data bundles.

However, Old Mutual does offer a 10GB and 20GB data bundle at compelling prices.

The table below compares Capitec Connect and Old Mutual Connect’s primary data product prices.

Mobile dataCapitec ConnectOld Mutual Connect
30 MBR1.35 (no expiry)R1.35
50 MBR2.25 (no expiry)R2.25
100 MBR4.50 (no expiry)R4.50
500MBR22.50 (no expiry)R22.50
1 GBR45 (no expiry)R45
2 GBR59R90
5 GBR145R225
10 GBR199R200
20 GBR299

In addition to its non-expiring data and aggressively priced data bundles, Capitec also launched daily and weekly data bundles.

Capitec Connect’s daily bundles range from 30MB for R0.90 to 500MB for R13.

Its 7-day bundles are 250MB for R7.50 and 1GB for R29.

Old Mutual Connect does not appear to have an equivalent for these products.

However, both MVNOs do offer voice bundles. Capitec Connect has 7-day and 30-day bundles, while Old Mutual’s expiry periods aren’t expressly stated.

Once again, Old Mutual’s prices appear to be calculated based on Capitec’s out-of-bundle rate. For voice calls, this is R0.90 per minute.

The table below summarises the two MVNOs’ voice prices.

Voice minutesCapitec ConnectOld Mutual Connect
7-day bundles
30 minR7.50
50 minR15
100 minR25
30-day bundles
30 minR27 (no expiry)R27
100 minR33R90
200 minR180
300 minR270
500 minR450
1,000 minR225

Capitec Connect’s pricing and strategy has been extremely successful.

In its financial results for the half-year ended 31 August 2024, Capitec revealed that its MVNO contributed R69 million to net income.

This profit growth is impressive, considering it is nearly double the net income recorded for Capitec Connect for the entire 2023/24 financial year, which ended in February 2024.

Capitec Connect reported a net income of R35 million during the 2023/24 financial year.

As of August this year, Capitec Connect had reached 1.2 million SIMs, of which 50% generated revenue within the past 30 days.

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