South African telecoms prices in 2016: what to expect

Internet Solutions has informed subscribers it is increasing the price of its connectivity and cloud services.

The company said the devaluation of the rand against leading currencies, along with inflationary impacts on its input costs, has significantly impacted its business.

“Unfortunately, maintaining existing pricing for connectivity and cloud services in 2016 is not sustainable,” said Internet Solutions.

Other SA telecoms operators are in the same situation, raising the question: Are price increases on the cards?

Vodacom: Being part of the Vodafone family gives us the ability to absorb the impact of the weaker rand

Vodacom said it is impacted by the volatility of the rand, as it procures network equipment and handsets from abroad.

However, because Vodacom is part of the Vodafone family, it gives the company the ability to absorb the impact of a weakened currency.

“We benefit from Vodafone’s bulk ordering with strategic suppliers which helps us contain and cope with volatility. This benefit enables us to minimize the effect of price hikes on our customers,” said Vodacom.

Vodacom said it periodically reviews its product propositions to ensure they are in line with the needs of its customers, and that they make financial sense to the business.

Cell C: We are not planning any price increases at this time

Cell C said the weakening rand has a widespread effect on businesses and consumers.

“Our industry is reliant on the procurement of infrastructure equipment and devices from international vendors and in foreign currency,” said Cell C.

“We do make sufficient provision for the currency fluctuations in our forecasts and business plan.”

Cell C said it is not planning any price increases at this time, and that its Epic products offer rates which remain unchanged for two years.

Telkom: We prioritised our capital expenditure programme to focus on the growth areas of fibre and LTE

Telkom said the economic and operating environment has deteriorated, driven by lower commodity prices and a weakening rand.

The outlook remains challenging on the back of lower growth expectations, higher interest rates, and rising inflation.

“Against this backdrop, we prioritised our capital expenditure programme to focus on the growth areas of fibre and LTE,” said Telkom.

“We have extended our debt maturity profile by raising a R1-billion loan. We remain conservatively geared with a net debt to EBITDA ratio of approximately 0.3 times.”

Telkom said it expects continued weakness in the economy, and anticipates that its customers will migrate to cheaper packages.

“We will partner with our customers to contain costs as well as take up any opportunities presented by the current environment to grow our business.”

BCX: We will continue to engage with clients to drive efficiency wherever possible

Business Connexion (BCX) said the weaker rand has affected many businesses, and has resulted in technology becoming more expensive.

“This coupled with the current price of oil, increasing interest rates, and slow GDP growth means that businesses have to react swiftly to economic conditions and will be under pressure to review cost structures to remain competitive,” said BCX.

BCX said it will continue to engage with its clients to drive efficiency wherever possible.

“This is how we do our business and consulting at Business Connexion – ultimately it’s about finding the value for both ourselves and our customers.”

Vox Telecom: We are looking at ways to lower the impact on customers

Vox Telecom CEO Jacques du Toit said they are faced with a weakening rand and a weakening economy.

“This is forcing companies like Vox to lower cost at all levels, like operating expenses and customer transaction costs, and use innovative procurement processes,” he said.

Du Toit said they have been faced with similar situations in the past, and times like this drive innovation in a business.

“We must be careful not to use the weakening rand as an excuse for everything. We will have the opportunity to assist our consumer and corporate customers with solutions that could reduce their operating expenses.”

He said there has been a phenomenal evolution in the ICT sector over the last few years. “We have seen more solutions being offered at reduced costs, and solutions offered are also aimed at reducing operations for users.”

Du Toit said there will be price increases on some Vox products, but they are looking at alternative ways to lower the impact on customers.

“The rand has lost approximately 50% of its value against the dollar over the last 12 months. To pass this to the consumer will not be sustainable.”

“Customers will be given various options to soften the impact. Some examples will include a phased increase, an extension of contracts at current price points, and renegotiated payment terms, to mention a few.”

Neotel – Our intention is not to increase prices

Mark Williams, Neotel’s GM for products and solutions, said there are two main components to Neotel’s communication services – international services they interconnect to, and the infrastructure and equipment they install in SA.

“Unfortunately, both these components are directly impacted by foreign currency exposure,” said Williams.

“In the short-term, our intention is not to increase prices, but the economic conditions may require us in future to review our pricing.”

He said the biggest impact of the weak rand is felt with their international products and imported equipment. “Additional support which is used in part offshore will be impacted.”

MTN – No comment

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