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Telcoms are exploiting South Africa’s poor, Commission finds

By Crystal Orderson, in Cape Town
Posted on Friday, 26 April 2019 11:31

Jacob Zuma and his son Duduzane enjoy data that poorer citizens can not afford due to abusive practices begun during his presidency. REUTERS/Siphiwe Sibeko

Consumers want data costs to fall and the Competition Commission is listening. What does that mean for telecoms companies?

Listeners to a local talk radio station in South Africa asked the question: “Why are we being so abused as South African consumers by mobile companies?”

The outrage followed the release of a preliminary Competition Commission report into the cost of mobile data.

Among the report’s findings:

  • MTN and Vodacom charge 6 to 10 times more in South Africa than they do in other countries.
  • In Tanzania, customers on average pay R79 for 1Gb, while South Africa customers pay R149 for 1Gb.
  • The retail pricing structure is anti-poor and lacks transparency.
  • International benchmarking confirmed that SA data prices are particularly high for mobile pre-paid data compared other BRICS and SADC countries.

Long time coming

In August 2017, the Competition Commission started hearings across the country into the costs of data prices. According to the Commission, it conducted a Data Services Market Inquiry to understand the general state of competition in the data services sector. It had reason to believe that there are features in the sector that may prevent, distort or restrict competition.

Vodacom charges, according to the report:

For a 1GB bundle, Vodacom charged its SA customers $11.06 (R147) in 2017

  • For the same bundle in the DRC Vodacom charges $8 (R107)
  • Lesotho $7.54,
  • Angola $3.32, and
  • Nigeria $2.77

MTN was not much different:

For a 1GB, MTN charged its SA customers $11.95 (R159) in 2017

  • For the same bundle in Uganda MTN charges $8.34 (R111)
  • Ghana $4.43,
  • Nigeria $3.15,
  • and Rwanda $2.32.

Shares of both companies fell on Wednesday after news of the commissions findings was released.

Vodacom spokesman Byron Kennedy emailed a response to questions from Bloomberg: “Vodacom can confirm that, as part of its ongoing pricing transformation strategy to address the cost-to-communicate in South Africa, we have reduced the effective cost of data by 34% in the past calendar year alone.”

MTN, Africa’s largest carrier by subscriber numbers, has so far not responded.

High profit margins

The ANC welcomed the report and said it had “made substantial submissions” to the Data Market Inquiry last year. It said:

“Access to data in the 21st century is important because it facilitates the realisation of many rights enshrined in our Bill of Rights, as well as enhancing economic participation and the strengthening of our democracy.”

Commissioner Tembinkosi Bonakele said the Commission was “shocked to see that the data prices were higher for the poor, especially those that are buying smaller bundles like pay as you go”. Bonakele indicated that the profit margins of Vodacom and MTN were very high.

“We’ve seen profit of 30% in SA as compared to other markets where is it’s about 12%, so it means they are making a lot of money in the country,” Bonakele said.

  • In March, statistics released by Cable – a UK analytics and research company – showed that South Africa’s mobile data costs per 1GB was higher than prices in Nigeria and Egypt.
  • According to Bloomberg, Vodacom and MTN had a combined 75 million customers in South Africa at the end of 2018.

The Competition Commission said the networks should introduce immediate relief to customers. It also wants:

  • A commitment by mobile operators to make the headline tariff levels match the current effective level of charges, to enhance price transparency;
  • A commitment by mobile operators to reduce the price of 1G bundles within an objectively and socially defensible range;
  • A consistent industry-wide approach to the zero-rating of content from public benefit organisations and educational institutions.

What now?

A final report is expected later this year. Meanwhile, the operators have until 14 June to submit their views on the interim report.

The Inkatha Freedom Party’s Mkhuleko Hlengwa says the report has shown that “companies continue to enjoy this monopoly due to the toothless regulation of this sector, in the main because the buck stops with the government not allowing this to take place.”

Bottom line: Perhaps South Africa’s regulators are waking up after the Zuma years; the telecoms operators’ next move will define their profitability over the next decade.

 

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