Policy Brief 2, 2015
Vodacom, MTN and CellC justified recent increases in their postpaid product prices with claims of rising input costs. These price increases have taken the form of increases in monthly subscriptions, out of bundle rates, and the quantity of bundled minutes, SMSs and data. Some plans remain unchanged but most plans face direct or indirect price increases. A new tool has been developed by Research ICT Africa to analyse postpaid price changes across operators and across Africa, taking very diverse postpaid features of products on offer into account. This tool is the Postpaid Value Index (PVI).
With its pro-poor focus RIA’s Mobile Pricing Transparency Index has focused on prepaid voice bundles, and since 2014 also prepaid mobile broadband pricing. The benchmarking of prepaid mobile broadband was combined with Ookla download and upload speeds by operators to produce the Mobile Broadband Value for Money Index. As voice revenues began to decline and user demand and operators business models shifted from voice to data, RIA noted that voice and data use and tariff offerings could no longer be understood separately. Consumers were getting the best value for money from integrated voice, data and SMS offerings where operators were competing most fiercely to retain and attract users. This resulted in RIA developing a new tool to analyse the value of different product in the postpaid market – the Postpaid Value Index (PVI) discussed here and the Top-Up Value Index (TVI) which will be published in the next policy brief
Highlights:
1. Vodacom released preliminary results for its financial year ending in March 2015, and CellC launched new products and started a buy back contract campaign in the same week as the RIA policy brief was launched. This required an immediate update.
2. CellC provided the best average value on their mobile contract offerings (postpaid) in Q1 2015. The average value offered by CellC to its contract customers declined through the launch of the Epic product series. Telkom Mobile provides the best average value in May 2015 as a result.
3. Vodacom’s claim that increased input costs necessitate price increases is reflected in its preliminary annual financial results for 2015. It invested significantly more in FY2015, overall and per subscriber.
4. MTN’s revenue, OPEX and CAPEX have been in decline for the last three financial years. This raises the question about what MTN’s strategy is. Increasing prices while investing less weakens its potential to compete and innovate.
5. Increasing prices may be justified by higher electricity costs and a weak Rand, but may not improve the bottom line. Disgruntled contract subscribers may move to prepaid or simply buy data bundles in order to use Over-the-Top services such as Skype and WhatsApp for voice and text services.
