State of prepaid market in South Africa – Submission to the Parliament of South Africa on “The Cost to Communicate in South Africa”

Alison Gillwald · Chenai Chair
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Policy Brief 4, 2016

Pent up demand for internet service has driven strong growth in data revenues for operators throughout Africa. Traditional voice and SMS revenues have, in turn, been shrinking but still make a significant contribution to operator revenues. Operators are launching promotional and personalised data products as a means of retaining and gaining revenue. With Over-the-Top (OTT) services increasingly acting as substitutes for the traditional voice and SMS services, operators are opting not to raise prepaid prices on their cheapest tariffs as a means of making up for lost revenues. Regulatory interventions such as cost-based termination rates have created consumer expectations of continued price reductions in voice offerings. Although some operators called for regulation of OTTs in the South African mobile market at Parliamentary hearings held earlier this year, their innovative new pricing strategies suggest responsiveness to this fast-changing environment. South African operators, in line with operators in other markets, have responded to disruptive OTT services by introducing new products such as bundled data, voice and SMS, or service-specific promotions. Are these new products easier on the pockets of consumers and are they transparent enough for consumers either to understand their value or their conditions?

Highlights:

1. Vodacom, MTN and Cell C are competing more and more on customised products for subscribers instead of strict service pricing.

2. Telkom fails to exert pressure on other operators despite undercutting competitors’ voice tariffs and monthly data prices.

3. Cell C’s strategy to champion best-value products, cheapest voice and SMS products, and subsidising an exclusive zero-rating strategy with a global social networking platform makes it the leader of the prepaid pack.

4. Customised products from service providers may result in reduced cost of communication but this requires high levels of consumer awareness to check the terms and conditions of such services which may have time or product limitations

Suggested citation

Gillwald, A., & Chair, C. (2016). State of prepaid market in South Africa Submission to the Parliament of South Africa on “The Cost to Communicate in South Africa” (Policy Brief No. 4). Research ICT Africa. https://researchictafrica.net/polbrf/Research_ICT_Africa_Policy_Briefs/2016_Policy_Brief_4_South_Africa_Cost_to_Communicate.pdf