Covid-19, pricing regulation and big player profitability

Policy Brief 3

The policy brief  examines the performance of the dominant mobile network operators in South Africa, MTN and Vodacom, by highlighting the data pricing transformation strategies adopted before and during the COVID-19 pandemic.

Although the Commission’s recommendations to lower the data price were only confirmed towards the end of 2019, the actual reduction in price from ZAR 150 to ZAR 99 took place in 2020_Q2, which was in the middle of the pandemic in South Africa.

Despite regulatory pressure and reduced prices, both operators have increased their revenue throughout the period, partly due to the upsurge in demand for data services. Furthermore, Vodacom recovered from the data price cuts in the second quarter of 2020.

However, as the RAMP Index indicates,  prices remain  high in South Africa compared to other countries as does the profitability of the dominant players MTN and Vodacom. They have continued to invest extensively in network extension – from past analysis the recipe to their success as consumer demonstrate a willingness to pay a premium for quality service if they are able to. The data pricing in Sudan is relatively cheap, although the quality of service needs to be improved. Operator price reductions and data transformation over the years is a welcomed development. However,  RIA calls for further price cuts to accommodate the poor and facilitate digital inclusion by bringing more people online since the cost of data has been one of the main reasons cited as to why a significant proportion of the population is still offline. The expected allocation of spectrum will allow for competition and bring prices down where most people will be online due to the dominance of MTN and Vodacom.

  • In line with global trends towards rising demand for mobile data and services during the Covid-19 pandemic mobile data and services usage has risen dramatically.
  • This appears to be supported by data price reductions last year mandated by the Competition Commission following the Data Services Market Inquiry. MTN and Vodacom reduced their 1 GB monthly data bundle from R149 to R99, in 2021_Q2 representing a 34% decrease in the price. MTN further reduced its data to R85 monthly GB during 2021_Q3.
  • South Africa’s data pricing remains prohibitively high compared to other African countries.  In 2021_Q3, South Africa ranked 34th out of 47 countries on the RAMP Index, with the most expensive mobile data in the region. 
  • MTN and Vodacom have performed well despite regulatory pressure
  •  High demand spectrum needs to be urgently released to enabling alternative providers with more cost-effective business models to enter the market with minimal regulatory transaction costs, together wholesale access regulation to remedy market dominance and enable smaller players to compete would go a long way to enabling the alternative delivery of services.
  • In South Africa, the cost of 1GB is USD 5.78, while in countries like Sudan and Tanzania, mobile data costs USD 0.68 and USD 1.51 per monthly gigabyte, respectively. In countries where MTN and Vodacom operate, South Africa also ranked in 10th place out of 14 countries.

Download the full Report here :

Suggested citation

Govan-Vassen, N., Chinembiri, T., & Moyo, M. (2021). Covid-19 and changes in data pricing on operators’ profitability: A case for Vodacom and MTN South Africa [Policy Brief]. Research ICT Africa.