Cellular26.11.2013

“Secret” report reveals truth about SA’s mobile prices

A mobile pricing report, based on research by two independent firms, debunks the long-held belief that low-end mobile subscribers in South Africa are getting a raw deal.

The Independent Communications Authority of South Africa (Icasa) recently told parliament that pre-paid mobile costs in South Africa were “way above” most other African countries.

ANC MP Livhuhani Mabija concurred, saying that the poorest of the poor are suffering because of the inability of Icasa to reduce mobile prices.

Communications minister Yunus Carrim reiterated this view, saying in September 2013 that South Africa ranks only 23rd on the African continent in terms of affordability of communication.

Carrim added that this worsens the “divide between the ‘haves’ and ‘have nots’ created by a past of inequality”.

However, these views are debunked by a report which shows that South Africa’s low-end mobile prices are well below countries with similar conditions to South Africa.

“Secret” report commissioned to find the truth

In 2012 South Africa’s mobile operators commissioned a report to establish how local mobile prices compare with international standards.

The report titled “Analysing the Cost of Mobile Communications” was done by two independent research firms – Strategy Analytics and Pygma Consulting.

What sets this report apart from other studies is that the research firms had access to sensitive information from Vodacom, MTN, and Cell C.

This information included the actual effective mobile tariffs paid by consumers, which guaranteed an accurate reflection of local prices.

The research firms selected 10 peer countries similar to South Africa based on demographics, geography, GDP and other relevant factors.

Seven different user profiles were then identified which reflect prices from a mobile user’s perspective.

Mobile prices were benchmarked against the peer countries, with the results taking purchasing power parity and tax levels into account.

Report and results kept secret

The sensitive nature of the information contained in the report means that the results were never made public.

It is understood that all the parties involved in this report, including the mobile operators, were sworn to secrecy through strict non-disclosure agreements.

However, after former MTN SA CEO Karel Pienaar presented some of the results to parliament in November 2012, curiosity started to grow about what the report revealed.

Research results

The “Analysing the Cost of Mobile Communications” report showed that the low-end of the South African mobile market received a very good deal when compared to the selected peer countries.

The high-end of the market paid more than their international counterparts for mobile services.

This report debunks the widely held belief that South Africa’s low-end market is receiving a raw deal, while high-end consumers score. The reality is in fact quite the opposite.

South African mobile prices benchmarked
Basket	Pre-paid voice, SMS and data	Pre-paid voice and SMS	Post-paid voice, SMS and data	Post-paid voice and SMS
	Low-income mobile subscribers
Low-low	65% cheaper	44% cheaper
Low	29% cheaper	11% cheaper	51% cheaper	38% cheaper
Medium	15% cheaper	5% more expensive	29% cheaper	10% more expensive
High	10% cheaper	23% more expensive	9% more expensive	80% more expensive
			High-income mobile subscribers

Mobile pricing results summary

The report compared prices based on seven baskets – 4 pre-paid and 3 post-paid (contract) baskets. The baskets ranged from “low-low” pre-paid to “high” post-paid.

These seven baskets were broken into two groups – “voice and SMS” and “voice, SMS and data”.

The following summary of results show that low-end products serving low-income South Africans are cheap relative to the benchmarked countries, while high-end products serving the high-income segment are relatively expensive.

Voice, SMS and data
Pre-paid baskets	Ranking/11 (lower is better)	South African prices
Low-low	2	65% cheaper
Low	4	29% cheaper
Medium	5	15% cheaper
High	6	10% cheaper
Post-paid baskets	Ranking/11 (lower is better)	South African prices
Low	3	51% cheaper
Medium	6	29% cheaper
High	9	9% more expensive

Voice and SMS only
Pre-paid baskets	Ranking/11 (lower is better)	South African prices
Low-low	4	44% cheaper
Low	7	11% cheaper
Medium	7	5% more expensive
High	8	23% more expensive
Post-paid baskets	Ranking/11 (lower is better)	South African prices
Low	1	38% cheaper
Medium	8	10% more expensive
High	10	80% more expensive