Voice prices continue to decline across all operators in South Africa with Telkom and Cell C reducing their prices by more than 50% since the first quarter of 2011. As the late entrants, these two operators are enjoying the benefits of reduced termination rates. The prices of 1GB monthly data bundles, on the other hand, have remained fairly constant – between R149 and R160 – over the last eight quarters, except for Telkom.
Telkom has the lowest-priced 1GB of data at R99, whereas Cell C has maintained its R149 price tag. Such prices remain unaffordable to a large number of citizens and this negatively affects not only Internet take up, identified in the National Development Plan as a critical tool in a modern economy as well as a target of SA Connect, but it also affects the intensity of use.
Although the innovative pricing and bundling strategies used by operators improve the effective price of data, cost structures are complex and inhibit their consumption by non e-illiterate users creating a concern for ICASA and policymakers. Taking a look at Research ICT Africa’s (RIA) database containing 1GB prepaid mobile data prices reveals more noteworthy trends and comparisons.
A comparison of Africa’s cheapest prepaid mobile data prices
Using RIA’s Africa Mobile Price (RAMP) Index shows that the cheapest 1GB price in South Africa ranks 27 out of 49 African countries for Q1 2017 — a 4-place drop from 23rd at the end of last year being overtaken by Senegal, Gambia, Algeria, and Togo. In Egypt, the cheapest 1GB of prepaid data is sold at USD 1.41; the same amount of data in South Africa is sold for USD 7.50. Price increases for South Africa are a reflection of USD exchange rate fluctuations instead of advertised price changes.
Using the same measure in the above table, South Africa came last out of six large telecommunications markets in Africa last quarter (Q1 2017). The cost of 1GB of data is three times the cost of the same data amount in Ghana and Tanzania, and more than twice the cost of 1GB in Nigeria. The operators in these countries who are offering these low prices are Glo Mobile, Airtel, and Smart.
To capture the value of combined data, SMS and voice products, RIA created a bundled value for money index. The index captures the state of competition and innovation in the market. Furthermore, it gives an indication of the value for money. South Africa performs well in comparison to other large markets such as Ghana, Nigeria and Tunisia. It ranks seventh out of 38 African countries – 11 points up from the previous quarter.
Figure 1: Value for money index ranking in the top 10 African countries
The improvements in South Africa’s ranking is due to the new offering by Telkom which offers consumers with 30 GB of data, unlimited SMS, unlimited on-net calls including fixed line calls, 300 minutes of off-net calls, Zero rated WhatsApp text and calls and Free Wi-Fi.
Data dictating financial performance
As of 2016, Vodacom South Africa reported revenue growth of 5.5% to R13.4 billion on the back of strong data revenue growth (22%), while the international service revenue contraction of 8.2% to R4.2 billion was attributed to customer registration processes and currency volatility. Data traffic growth was registered at a mammoth 44.8% in South Africa, with data now comprising 40.8% of service revenue in South Africa. As of 31 March 2017, a quarter of all Vodacom’s mobile prepaid revenue was generated from bundles. Vodacom report that it had sold a billion voice bundles in the year ended 31 March 2017 and the company has about 16.4 million customers who use those bundles. The increase in demand for data coincides with a 20% drop in mobile voice revenue from R29.2 billion in FY2013, to R23.2 billion in FY2017 as market demand shifted to data*.
The MTN Group reported that in the year that ended 31 December 2016, its top line was negatively affected by lower revenue in Nigeria, Cameroon, Ivory Coast and Uganda due to regulatory challenges and aggressive competition. The Group reported that these impacts, however, were partly offset by revenue growth in South Africa (4.7%) and Ghana (19.8%). The increase in revenue in South Africa was due to higher handset sales and data revenues. In comparison to Vodacom, MTN is still dependent on the voice market which contributes about 64% of its total revenue.
Up to date financials for Cell C are more difficult to analyse as it is an unlisted company and is not required to publish such information. Cell C’s financials showed the company had accumulated an overall profit of about R2.8 million as of June 2016. In the first six months of 2016, Cell C recorded revenue of about R7 billion, up from R6 billion the year before. The improvement in revenue was attributed to an increase in service spend due to market share expansion, growth in data use and that of new product offerings. Cell C’s released its financial results for the year ending 31 December 2016, in which it declared revenue to be about R14.6 billion and with a profit taking of R540 million. The company attributes the growth in service revenue (about 8%) to growth in data volumes, which increased by 67% in the reporting year. Cell C claimed a 35% increase in data revenue, bringing it to R4.4 billion.
Building user evidence
Indications are that while data subscriptions are increasing, the average time spent online by South Africans is still very low by global standards and Internet use is far more limited than in other lower-middle income countries. This means that although South Africa may be reaching the critical mass necessary to see the correlations between broadband penetration and economic growth, the intensity of use may be too low on average to for it to enjoy the associated network effects and positive multipliers.
The only way to understand these demand-side dynamics, and in order to address them in policy, is through nationally representative demand-side surveys. In a prepaid mobile market, this is the only way to disaggregate users on the basis of gender, income, education and rural-urban location in order to understand the inequality that national averages, especially those based on GDP per capita, mask.
In the absence of such public statistics in South Africa, Research ICT Africa, with the support of the International Development Research Centre, the Swedish International Development Agency, and the South African domain name authority (ZADNA), is currently conducting nationally representative ICT Access and Use Surveys in South Africa. This is part of a 12-country African comparative study and an international comparative study covering more than 20 countries in the Global South, on which governments and regulators in other jurisdictions have collaborated.
*For all figures, see: https://www.techcentral.co.za/mobile-voice-prices-have-halved-since-2013/73916/