{"id":64412,"date":"2014-07-31T00:05:39","date_gmt":"2014-07-30T22:05:39","guid":{"rendered":"http:\/\/businesstech.co.za\/news\/?p=64412"},"modified":"2014-07-30T16:55:25","modified_gmt":"2014-07-30T14:55:25","slug":"sa-mobile-prices-too-low","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/mobile\/64412\/sa-mobile-prices-too-low\/","title":{"rendered":"SA mobile prices sinking too low?"},"content":{"rendered":"

SA mobile operators may be acting too aggressively in lowering their prices in reaction to increased competition and a change in mobile termination rates (MTRs).<\/p>\n

In announcing the company results for the three months ended June 2014, Vodafone chief executive, Vittorio Colao, questioned the aggressive moves by Vodacom\u2019s competitors, MTN and Cell C.<\/p>\n

Vodafone has a 65% stake in Vodacom.<\/p>\n

In a conference call last week, Colao noted that a reduction in mobile termination rates (MTRs) and the change in symmetry “has clearly enabled Cell C to start [competing] aggressively\u201d.<\/p>\n

Termination rates are the fees mobile operators pay to each other to connect calls to each other\u2019s networks.<\/p>\n

The regulation on \u201casymmetry\u201d lets smaller mobile operators, namely Cell C and Telkom Mobile, charge Vodacom and MTN more for connecting calls to their networks.<\/p>\n

\u201cMy judgment there has also been a little bit of an overreaction from MTN,\u201d he said.<\/p>\n

He cautioned that, while it was good for operators to react to competitor prices, if you forced them with their backs up against the wall, it would only create further reaction.<\/p>\n

The chief executive said that while the market reacted to MTRs, it may be \u201ca little bit…[too] excessively at the low point\u201d.<\/p>\n

\u201cI don’t know if this is sustainable long term,\u201d Colao said.<\/p>\n

He added that he believed that Vodacom was doing the right thing by being selectively responsible. He said that while there should be a reaction to competitor\u2019s moves, it should not necessarily be a reaction that leaves competitors with their backs against the wall.<\/p>\n

His comments are similar to the sentiments of MTN Group chief executive\u00a0Safiso Dabengwa, who has been critical of smaller competitors in the past, warning that\u00a0\u201cthey start doing very destructive things in the market in the hope that it will improve their position\u201d.<\/p>\n

Vodacom, and MTN have come under pressure in recent earning periods when it comes to local operations.<\/p>\n

Last week, Vodacom reported a 2%\u00a0decline in\u00a0service revenue in\u00a0South Africa, in a quarterly update for the period ended June 2014,\u00a0<\/span>due to MTR cuts.<\/span><\/p>\n

The group said that revenue would have climbed 2%, had the\u00a0impact of MTRs been excluded. <\/span><\/p>\n

Shameel Joosub, Vodacom Group CEO, said that a\u00a0<\/span>50% cut in MTRs in April 2014 led to a 44.0% reduction in\u00a0incoming voice revenue.<\/p>\n

In May, Dabengwa said that MTN Group\u2019s South African operation remains under pressure as it ensures its market offerings are attractive in a highly competitive data and voice market.<\/p>\n

He was speaking at the group\u2019s annual general meeting.<\/p>\n

Dabengwa said that MTN South Africa has experienced negative revenue growth for the first four months of 2014, when compared to the same period last year.<\/p>\n

Price war continues<\/strong><\/p>\n

Operators have been on a drive in recent months to lower their call rates.<\/p>\n

Following the implementation of MTR cuts in April, and a widely-publicised media spat with Cell C, MTN permanently dropped its standard prepaid rate to 79c\/minute.<\/p>\n

Vodacom followed suit by launching a promotional rate at the same price (79c\/minute).<\/p>\n

Feeling the pressure from the operators, Cell C finally responded with a 66c\/minute promo rate, which was shortly followed by MTN introducing a promotional rate at 60c\/minute.<\/p>\n

Cell C then hit the market with a 50c offering last week.<\/p>\n

MTN has also launched its MTN Pulse service on 22 July, offering calls to other MTN Pulse subscribers for as low as 29 cents per minute.<\/p>\n

Telkom Mobile has stayed relatively quiet during the spat, popping up only to point out that its Sim Sonke deal – which offers users calls at 29c\/min on-net and 75c\/min to other networks – has always been the cheapest.<\/p>\n

A numbers game<\/strong><\/p>\n

On Friday last week, Cell C said it has grown its subscriber base by an additional 1.5 million in the past three months to 18.1 million at 30 June 2014.<\/p>\n

Industry veteran, and former Vodacom and Cell C CEO, Alan Knott-Craig, has for some time maintained that operators needed a minimum of 25% market share in order to be profitable.<\/p>\n

The latest figures suggest that the group is only a fraction away from achieving that total market share.<\/p>\n

\"BMI<\/a>

BMI Subscriber numbers<\/p><\/div>\n

In its quarterly update last week, Vodacom reported a local subscriber base of 32.5 million.<\/p>\n

In April, MTN reported that its South African operation reduced subscriber numbers by 824,768, bringing total subscribers to 24.9 million for the period ended March 2014.<\/p>\n

Telkom\u2019s mobile business has 1.8 million subscribers, as reported in June.<\/p>\n

More on Vodacom<\/h3>\n

Vodafone revenue dragged down by Vodacom<\/strong><\/a><\/p>\n

We are under pressure in SA: MTN<\/strong><\/p>\n

MTN CEO warns \u201cdestructive\u201d rivals<\/strong><\/p>\n

Vodacom revenue hit by MTRs<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

SA mobile operators may have been too aggressive in lowering their prices in reaction to increased competition, according to Vodafone chief executive, Vittorio Colao.<\/p>\n","protected":false},"author":10,"featured_media":57623,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[34],"tags":[42,26,28,3403,1890,27,737],"class_list":["post-64412","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mobile","tag-cell-c","tag-headline","tag-mtn","tag-shameel-joosub","tag-sifiso-dabengwa","tag-vodacom","tag-vodafone"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/64412","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/10"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=64412"}],"version-history":[{"count":13,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/64412\/revisions"}],"predecessor-version":[{"id":64442,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/64412\/revisions\/64442"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/57623"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=64412"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=64412"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=64412"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}