Mobile broadband specials below cost: Vodacom CEO

i dont understand how they can even begin to quantify a number like "below 10c/Meg is not sustainable". Its impossible.

What if you offer 1c / meg and your users use 10 times more?
What if data costs 5c/Mb at 0100 in the morning and some users use 20 times more than they would have otherwise?
What if you charge 15c/Mb (in other words "sustainable") but by doing so you loose out on 20 terrabytes a month because you are charging 15c/Mb?
What if tomorrow you sell a new smartphone like hotcakes and it alone adds a total 10 Terrabytes a month worth of revenue? Does it then become 9c/Meg is not sustainable?

How can these shiny shoe people, with a straight face, try and convince someone like me that even with all the statistical voodoo you can pull out of your hats, that a figure of 10c/Mb is where its at? W... T... F...

PLEASE... and this is my qualm with middle/upper management in most companies... TELL US WHY... in NuMBERS... USING FACTS... why under 10c/Meg is unsustainable. Otherwise you start looking like a bit amateur imho.
 
If 1GB of VC data is going to cost me R100 and they can offer me reliability, then I will gladly pay for it, but if it was R10GB and they continue with the current unreliability, then I'm not interested. For me its all about reliability and I understand that requires more hardware and infrastructure.
 
As I've mentioned before, what Vodacom believes is unsustainable seems to be perfectly sustainable for Vodafone UK, go figure...

2GB @ £15 x 11.06 = R165.90 / 2048 = 8.1c/mb
5GB @ £25.53 x 11.06 = R282.36 / 5120 = 5.5c/mb

*deals exclude 3G modems. Note these are month-to-month options, no contract!
 
morkhans said:
As I've mentioned before, what Vodacom believes is unsustainable seems to be perfectly sustainable for Vodafone UK, go figure...

2GB @ £15 x 11.06 = R165.90 / 2048 = 8.1c/mb
5GB @ £25.53 x 11.06 = R282.36 / 5120 = 5.5c/mb

*deals exclude 3G modems. Note these are month-to-month options, no contract!
Click to expand...

Come on Morkhans, engage a bit of grey matter here.

You're saying the pricing should be the same implying the company dynamics are similar. Do you really believe that? Input costs, for one, are the same between the UK and South Africa?

Have you done some numbers to show this?
 
stricken said:
i dont understand how they can even begin to quantify a number like "below 10c/Meg is not sustainable". Its impossible.

What if you offer 1c / meg and your users use 10 times more?
What if data costs 5c/Mb at 0100 in the morning and some users use 20 times more than they would have otherwise?
What if you charge 15c/Mb (in other words "sustainable") but by doing so you loose out on 20 terrabytes a month because you are charging 15c/Mb?
What if tomorrow you sell a new smartphone like hotcakes and it alone adds a total 10 Terrabytes a month worth of revenue? Does it then become 9c/Meg is not sustainable?

How can these shiny shoe people, with a straight face, try and convince someone like me that even with all the statistical voodoo you can pull out of your hats, that a figure of 10c/Mb is where its at? W... T... F...

PLEASE... and this is my qualm with middle/upper management in most companies... TELL US WHY... in NuMBERS... USING FACTS... why under 10c/Meg is unsustainable. Otherwise you start looking like a bit amateur imho.
Click to expand...

Stricken, it's not black magic to do these calculations. All you need is a relatively educated person and Excel.

You take all your input costs (there's a LOT of these both Capex and Opex) and divide the capacity of the network into that. That gives you the cost to carry a MB of data and thus you can come up with a retail value.

It's just like you manage your allowance, just a much bigger spreadsheet. ;)
 
jannievanzyl said:
Stricken, it's not black magic to do these calculations. All you need is a relatively educated person and Excel.

You take all your input costs (there's a LOT of these both Capex and Opex) and divide the capacity of the network into that. That gives you the cost to carry a MB of data and thus you can come up with a retail value.

It's just like you manage your allowance, just a much bigger spreadsheet. ;)
Click to expand...

In a recent interview with MyBroadband, Vodacom CEO Pieter Uys said that while it is complex to calculate the exact cost of delivering a MB of data over their network, their current 2GB promotional price is definitely below cost.
Click to expand...

Then your company needs a new CEO if it's that "simple" hey jannie? ;)

PLEASE... and this is my qualm with middle/upper management in most companies... TELL US WHY... in NuMBERS... USING FACTS... why under 10c/Meg is unsustainable. Otherwise you start looking like a bit amateur imho.
Click to expand...

Your smart arse comeback still does not do the above though. I agree with Stricken...
 
jannievanzyl said:
Come on Morkhans, engage a bit of grey matter here.

You're saying the pricing should be the same implying the company dynamics are similar. Do you really believe that? Input costs, for one, are the same between the UK and South Africa?

Have you done some numbers to show this?
Click to expand...

While I agree that the local leg is still costly, alternative options as well as self built networks are pushing costs down. I'll point to the fact that the arrival of Seacom pushed ADSL from ~R70/gb down to ~R20/gb and later brought uncapped, yet none of that saving has found its way to the mobile networks. Vodacom business attributed savings for its ADSL customers to Seacom way back when it landed, yet Vodacom didn't pass anything on to the consumers. Seeing as MTN didn't blink nothing needed to be done to the pricing (as has always been the agreement). WACS is also just around the corner, while not as drastic, I'm expecting more love for ADSL users when it goes online and nothing for mobile users.

The point is that I didn't have to look far (albeit elsewhere in the world) to find pricing that Vodacom and others claim is unsustainable. I'm sure I could find cheaper if I had the time, it was just convenient that the prices happened to be from Vodafone (hey even the colours match now ;)). The other point is that if it's doable elsewhere why are you not following the "world class" benchmark and pushing to achieve those prices? It's so obvious with the current MTN and Vodacom promotions that Cell C has rocked the boat and rather than taking the lead, band-aids are being applied in the guise of promotional deals.

The other atrocity is that nothing is being done by either provider to help their existing clients. If you are currently paying R389/pm for 2G and have 12 months to go on your contract, though luck Mr. Customer! We only care about new clients and those at end of term who are thinking about jumping ship.

Again all these actions (or inactions) just highlight how well MTN and Vodacom have done to control the market and look after their most important assets: Their shareholders.
 
morkhans said:
While I agree that the local leg is still costly, alternative options as well as self built networks are pushing costs down. I'll point to the fact that the arrival of Seacom pushed ADSL from ~R70/gb down to ~R20/gb and later brought uncapped, yet none of that saving has found its way to the mobile networks. Vodacom business attributed savings for its ADSL customers to Seacom way back when it landed, yet Vodacom didn't pass anything on to the consumers. Seeing as MTN didn't blink nothing needed to be done to the pricing (as has always been the agreement). WACS is also just around the corner, while not as drastic, I'm expecting more love for ADSL users when it goes online and nothing for mobile users.

The point is that I didn't have to look far (albeit elsewhere in the world) to find pricing that Vodacom and others claim is unsustainable. I'm sure I could find cheaper if I had the time, it was just convenient that the prices happened to be from Vodafone (hey even the colours match now ;)). The other point is that if it's doable elsewhere why are you not following the "world class" benchmark and pushing to achieve those prices? It's so obvious with the current MTN and Vodacom promotions that Cell C has rocked the boat and rather than taking the lead, band-aids are being applied in the guise of promotional deals.

The other atrocity is that nothing is being done by either provider to help their existing clients. If you are currently paying R389/pm for 2G and have 12 months to go on your contract, though luck Mr. Customer! We only care about new clients and those at end of term who are thinking about jumping ship.

Again all these actions (or inactions) just highlight how well MTN and Vodacom have done to control the market and look after their most important assets: Their shareholders.
Click to expand...

Well said!
 
jannievanzyl said:
Stricken, it's not black magic to do these calculations. All you need is a relatively educated person and Excel.

You take all your input costs (there's a LOT of these both Capex and Opex) and divide the capacity of the network into that. That gives you the cost to carry a MB of data and thus you can come up with a retail value.

It's just like you manage your allowance, just a much bigger spreadsheet. ;)
Click to expand...

So what are you really trying to tell us Jannie? That your company is either too dumb to work this out or too crooked to release the figures of WHY anything less than 10c per mb is unsustainable?

As far as I can understand it, Stricken asked why it's unsustainable , not how to figure it out. That's not our job. We'd like an answer, not do your jobs for you.
 
stricken said:
i dont understand how they can even begin to quantify a number like "below 10c/Meg is not sustainable". Its impossible.

What if you offer 1c / meg and your users use 10 times more?
What if data costs 5c/Mb at 0100 in the morning and some users use 20 times more than they would have otherwise?
What if you charge 15c/Mb (in other words "sustainable") but by doing so you loose out on 20 terrabytes a month because you are charging 15c/Mb?
What if tomorrow you sell a new smartphone like hotcakes and it alone adds a total 10 Terrabytes a month worth of revenue? Does it then become 9c/Meg is not sustainable?

How can these shiny shoe people, with a straight face, try and convince someone like me that even with all the statistical voodoo you can pull out of your hats, that a figure of 10c/Mb is where its at? W... T... F...

PLEASE... and this is my qualm with middle/upper management in most companies... TELL US WHY... in NuMBERS... USING FACTS... why under 10c/Meg is unsustainable. Otherwise you start looking like a bit amateur imho.
Click to expand...

You make some very valid points however after my experience with CellC I am not convinced that 3G makes sense as a high volume application meaning that prices may have to be kept high to ration supply.

At the same time charging per meg means that SA ISPs will have a tough time trying to map a demand curve for data which means they may never get it right.

That said, the massive investment required for uncapped 3G at R500/month would eventually pay for itself, much like the then 'massive' cost of building fixed line networks was recouped
 
well it's all bull cos if stellenbosch university (via TENET & SEACOM) can charge 1c/mb (off-off peak), 5c (off-peak) and 10c (peak) and still make a profit then so can any large isp that has it's own infrastructure. And btw most large traffic comes during off and off off peak when ppl download stuff cos it is so cheap!
 
morkhans said:
While I agree that the local leg is still costly, alternative options as well as self built networks are pushing costs down. I'll point to the fact that the arrival of Seacom pushed ADSL from ~R70/gb down to ~R20/gb and later brought uncapped, yet none of that saving has found its way to the mobile networks. Vodacom business attributed savings for its ADSL customers to Seacom way back when it landed, yet Vodacom didn't pass anything on to the consumers. Seeing as MTN didn't blink nothing needed to be done to the pricing (as has always been the agreement). WACS is also just around the corner, while not as drastic, I'm expecting more love for ADSL users when it goes online and nothing for mobile users.

The point is that I didn't have to look far (albeit elsewhere in the world) to find pricing that Vodacom and others claim is unsustainable. I'm sure I could find cheaper if I had the time, it was just convenient that the prices happened to be from Vodafone (hey even the colours match now ;)). The other point is that if it's doable elsewhere why are you not following the "world class" benchmark and pushing to achieve those prices? It's so obvious with the current MTN and Vodacom promotions that Cell C has rocked the boat and rather than taking the lead, band-aids are being applied in the guise of promotional deals.

The other atrocity is that nothing is being done by either provider to help their existing clients. If you are currently paying R389/pm for 2G and have 12 months to go on your contract, though luck Mr. Customer! We only care about new clients and those at end of term who are thinking about jumping ship.

Again all these actions (or inactions) just highlight how well MTN and Vodacom have done to control the market and look after their most important assets: Their shareholders.
Click to expand...

i concur
 
Edduck said:
well it's all bull cos if stellenbosch university (via TENET & SEACOM) can charge 1c/mb (off-off peak), 5c (off-peak) and 10c (peak) and still make a profit then so can any large isp that has it's own infrastructure. And btw most large traffic comes during off and off off peak when ppl download stuff cos it is so cheap!
Click to expand...

And the general feeling here at the University is that the prices are waaaay to high ;)
The University however claims that they break about even with the prices as it is. As far as I know, it gets subsidized by the government in part though.
 
rpm said:
Mobile data specials are below cost: Vodacom CEO

Despite selling data below cost, mobile operators continue to offer promotional specials, likely due to competitive pressures
Click to expand...

Funny how those data rates are sustainable for almost every 3G operator in the world but in SA they are "below cost". Maybe you should stop spending quite as much on parties, animated meerkats, licensing of popular songs, sports, and expensive incredibly pervasive-to-the-point-of-absurdity stupid marketing campaigns telling us you're "red" every three seconds via every possible communication channel short of hiring full-time skywriters in every city (or did you already, and I missed that?). Then your "capex" and "opex" costs would be lower, you could offer the rates "sustainably" and you might even get more customers because you're actually offering something better and not just trying to "brand" everyone.
 
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Am I the only one who saw report yesterday that Vodacom SA just made over R20 000 000 000(20 billion, EBITDA +5.8%) profit last financial year? Report also stated data revenue increased 35.5% to over R6 000 000 000(that's 6 billion, btw)!!
 
oldhat said:
Am I the only one who saw report yesterday that Vodacom SA just made over R20 000 000 000(20 billion, EBITDA +5.8%) profit last financial year? Report also stated data revenue increased 35.5% to over R6 000 000 000(that's 6 billion, btw)!!
Click to expand...

after googling a bit... 2010

South Africa based Vodacom has reported a 2.9% rise in its first fiscal half revenues to R$29.5 billion (US$4.32 billion), while net profits jumped from R$59 million a year ago to R$4.27 billion (US$647.8 million). For the six months to the end of September, EBITDA was also up, by 2.8% to R$7.8 billion (US$1.14 billion).

What is below cost for vodacom.... one billion dollars? Greed is a funny thing.
 
It's really huge to see the competition and how it is improving choices for us!
 
Mobile data operators are in the perverse position of not wanting their subscribers to use their product more. The more their subscribers use their network, the more congested it becomes and more upset subscribers become about service levels. The result is that network providers do everything they can to charge customers as much as they can get away with while encouraging subscribers to use their network as little as possible.

So high data charges serve 2 purposes:

1) Discourage subscribers from using the network
2) Make up for lost revenue from point 1.
 
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oldhat said:
Am I the only one who saw report yesterday that Vodacom SA just made over R20 000 000 000(20 billion, EBITDA +5.8%) profit last financial year? Report also stated data revenue increased 35.5% to over R6 000 000 000(that's 6 billion, btw)!!
Click to expand...
It may seem like a lot, but the cost of delivering this data is high - both in terms of Capex and Opex:

  • Vodacom is planning to plough R6.6 billion into its network in South Africa over the next twelve months, which includes increasing transmission capacity, growing its 3G footprint and upgrading its current 3G network
  • Throw in marketing, operational costs, bandwidth costs and the like and the R6billion in data revenue does not like like that much any longer.

I still find the best way to assess costs to look at international trends - hence mobile data costs in both developing and developed countries. I have not looked at that yet, but it may give an indication if SA's services are well priced or expensive.
 
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