Telecommunications companies are set for a fresh round of inquiry into the cost of communicating in the country.
SA’s communications minister is looking to further push down the cost of communicating through a directive to the telecom regulator.
The minister indicated that the government plans to override the market, implying a dictatorship of prices.
While the cost of communicating is perceived to be high, evidence shows prices have come down since competition authorities made recommendations three years ago.
However, SA prices are still high compared with those of other countries. Additionally, high unemployment and inflation have resulted in consumers being under pressure and finding internet access expensive.
In 2020, Vodacom and MTN — after an investigation by the Competition Commission — were forced to drop mobile data prices by as much as 50%, eating into their margins.
Minister of communications and digital technologies Khumbudzo Ntshavheni said: “The cost to communicate are not decreasing at the pace that government wants and to mitigate this, in the first quarter of the new financial year, we are going to issue a policy direction to the regulator Icasa to study models that other countries are adopting to fast-track the reduction of cost to communicate without relying on market forces.”
According to the government, a policy directive communicates changes to the interpretation or application of policies and legislation. “They can come in different forms, such as prescripts that interpret and clarify legislation regarding procedures, processes and practices that must be followed.”
Before competition authorities issued their recommendations in December 2019, the average price on 1GB of data had been R149. That has since dropped more than a third to R85 for Cell C, MTN and Vodacom.
“Over the last two years, we materially reduced mobile data prices in SA — including a 43% reduction in the 1GB data bundle price point,” said Vodacom boss Shameel Joosub in the group’s most recent annual report.
MTN head Ralph Mupita said the average cost to communicate for our customers came down by 22.5% — effective data pricing — in the six months to June 2022.
Data costs are usually measured according to headline price, which refers to the actual price of data bundles, before taking into account promotions or extra services that may reduce the cost per gigabyte. At R85 for 1GB, the cost per gigabyte for that bundle is R85. If Vodacom then offers double the data for the same price, the cost per gigabyte is halved. In previous years, headline prices remained unchanged with operators offering special promotions as a way to effect “lower prices”.
A look back over the past decade shows that prices were flat, driven down mainly by promotions.
Saifaddin Galal, of market research firm Statista, says: One gigabyte of mobile internet in SA costs, on average, $2.04 (or R37.58) in 2022. This translates to a 74.8% drop in price from 2019.
According to Galal, SA ranked 135 out of 233 countries worldwide on this, “from the cheapest to the most expensive for mobile data”. Out of 57 data plans measured, the lowest price observed by Statista was $0.07 (R1.29) per 1GB for a 30-day plan.
With lower margins, mobile operators have been working to get more people to use its mobile data services. By driving up volumes, it can offset the lower margins and in turn increase adoption of new digital services such as fintech.
Mobile data price are expected to keep coming down as operators focus on increasing data traffic volumes and new revenue streams.
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