South African smartphone prices could increase this year – but not across the board

As part of its ‘cost to communicate’ representations at Icasa towards the end of March, South Africa’s largest communications companies outlined their plans to further reduce data costs in the country, and the measures they had already implemented to reduce these costs.

One of the most notable measures was in MTN’s presentation where the company stated that it had paid over R570 million on subsidising ‘ad valorem duties’ when bringing devices into the country.

While an impressive sum, this amount of money is unlikely to go as far in the coming years, with National Treasury stating that it plans to increase the tax on luxury goods as part of the 2018 budget – with a specific classification for smartphones.

“Effective 1 April 2018, the maximum ad valorem excise duty for motor vehicles will be increased from 25% to 30%, and the classification of cellular telephones will be updated to include smartphones to ensure they attract ad valorem excise duties,” the 2018 budget review states.

“In addition, the ad valorem excise duty rates (now at 5% and 7%), will be increased to 7% and 9%, ensuring that households spending more on luxury goods contribute proportionately more to revenue,” it states.

Cost on devices

Speaking to BusinessTech, Jacqui O’Sullivan executive for Corporate Affairs at MTN SA, said that device subsidies were important for the company as they help bridge the digital divide in many ways.

“Through these subsidies, we help connect customers to broadband who would otherwise not have been connected and through this, we lower the means to communicate for many of our subscribers. We shall continue to do so.”

O’Sullivan added that the impact of the increase will depend on the units imported at year end.

“MTN is continuing to improve products and drive pricing transformation to create a more suitable portfolio for customers,” she said.

“These product and portfolio changes began in 2017 and will result in pricing changes apart from the increase in VAT. Ongoing challenges, such as spectrum constraints and the cost to communicate, play a direct role in determining both device and data prices.”

“Over the past five years MTN has reduced the cost to communicate by an average of 66%, while increasing capex investment to R11 billion for the past three years.”

Read: MTN has the best mobile network in South Africa: research

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South African smartphone prices could increase this year – but not across the board