Mobile telecommunications is getting cheaper in South Africa — and consumers can thank an emerging price war between the country’s two largest network operators for the plunging cost of voice and data services.
MTN fired the first salvo in September, when it unveiled a new tariff plan called SuperFlex. Now Vodacom has responded, rolling out PowerFlex, which is similarly aggressively priced (and named — something MTN cannot be amused about).
MTN SuperFlex offers data-rich month-to-month contracts — 10GB for R299, for example. That pricing is not out of the ordinary in 2023 for a large data bundle, except the company went much further: SuperFlex also offers unlimited calls and SMSes to any local network, all included in the price. And there’s no lock-in or long-term contracts; you simply bring your own device or load the cost of a new phone onto the tariff plan. It’s built as an online SIM-only product, and there’s no need to visit a store, as MTN will deliver the SIM, free of charge.
There’s also a 15GB version of SuperFlex (also including unlimited calls and texts) for R399 and a 20GB option for R479. MTN hasn’t disclosed how many people have signed up for SuperFlex, but logic dictates that it must be considerable, given its relative affordability in severely constrained economic times.
Vodacom’s PowerFlex, meanwhile, which the company launched on its website recently without much fanfare, also offers unlimited all-network calls and texts for a fixed monthly fee. Unlike SuperFlex, though, it comes in only two data options: the curiously sized 17GB (for R449) and 22GB (for R579).
Though Vodacom doesn’t offer an equivalent to MTN’s 10GB/R299 plan (perhaps it’s worried about its margins), the pricing is still aggressive — and it had to be to respond to SuperFlex.
Both SuperFlex and PowerFlex offer data with 60-day validity. The MTN data can also be shared with up to five other users; it’s not clear if the same is true of PowerFlex. Also, Vodacom’s plan is billed as “promotional” — it is set to end on March 31 2024 — while SuperFlex appears to be more permanent in nature. Of course, Vodacom may have little choice but to continue to offer PowerFlex beyond March or lose market share to its crosstown rival.
The pressure may be felt by South Africa’s smaller telecoms players, Telkom and especially Cell C, which don’t have the same deep pockets
The “yellow network” isn’t standing still either. Just as Vodacom was launching its response to SuperFlex, MTN upped the ante, launching aggressively priced data bundles for prepaid customers.
There are no free calls or texts on offer this time, but the tariff plan, which is called Super Data, offers 30-day validity and comes in three tiers: 30GB for R215, 70GB for R299 and 200GB for R399. The 200GB bundle works out to just R2/GB — or about 1,000 times cheaper than the standard ad hoc rate of R2/MB (R2,048/GB) for data that was common in the industry just 15 years ago.
How will Vodacom respond? You can be sure it will devise something similar, even if it doesn’t really want to — it can’t afford to lose market share. The pressure may be felt more by South Africa’s smaller telecoms players, Telkom and especially Cell C, which don’t have the same deep pockets as their bigger rivals that would allow them to engage in a price war for a sustained period.
That must be particularly concerning for the new management team at Cell C, led by former Vodacom executive Jorge Mendes. Cell C’s balance sheet remains stretched, despite the recent recapitalisation led by its largest shareholder, JSE-listed Blue Label Telecoms.
A price war is probably the last thing Mendes needs as he tries to get Cell C onto a stronger footing financially. A protracted price war between the industry’s two biggest players would likely make an already difficult turnaround job that much harder. In Cell C’s favour is that it no longer operates its own radio access network, having strategically outsourced this responsibility (and the huge costs involved) to Vodacom and MTN.
Telkom is still committed to deploying and operating its own network infrastructure, but one must wonder for how much longer. The emerging price war puts Telkom — which was for years able to undercut its bigger rivals in data pricing thanks to its having access to the right radio frequency spectrum bands — under greater pressure.
Telkom lost much of its spectrum advantage in the 2022 auction at which Vodacom and MTN spent billions to buy many of the best spectrum lots on offer. When the Independent Communications Authority of South Africa holds its next auction, which has been pencilled in for next year, its advantage will be eroded even further.
The entire sector is under pressure, for a variety of reasons. One of those is that investors are starting to fret about the impact of a protracted price war on earnings. Share prices are flirting with multiyear lows.
A few years ago, an activist campaign under the banner “data must fall” went viral on social media. Politicians latched on to it, demanding that greedy mobile operators slash their prices. It turns out there was never really a cartel. And data, and the price of telecom services broadly, has “fallen”.
* McLeod is editor of TechCentral
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