SA`s two dominant cellphone operators have countered a recent report that paints them in a monopolistic and anti-competitive light.

According to the latest report by Research ICT Africa (RIA), SA`s mobile industry as a whole falls short when it comes to offering consumers affordable prepaid mobile tariffs. The report, conducted over the past year, ranks SA 32 out of 46 African countries in terms of prepaid mobile telephony affordability.

The main culprits contributing to the finding, says the report, are Vodacom and MTN, which “do not compete for price”. RIA asserts that the two dominant mobile market players “have been able to withstand the pricing pressure from price cuts by later entrants, and all operator`s prices have settled around the levels set by them”.

Despite the entrance of relative latecomers to the market, Cell C and 8ta trying to introduce cheaper mobile prepaid products, says RIA, these products have not resulted in a general price reduction.

MTN is identified in the report as being “constantly the most expensive in the low-user basket”, with SA`s first mobile operator Vodacom weighing in at a consistent second.

MTN responds

While the report says “Pricing is the key indicator of the competitiveness of markets”, MTN begs to differ, saying there have been significant movements in the South African market where price has ceased to be the main driver for competitiveness.

“[Pricing as the main driver for competition] has been replaced by free upfront and tenure-based minutes of value offered to customers, regardless of the package a customer is on, driven by a growth in demand for free value in the market.”

On this basis, says MTN, RIA makes the “incorrect summation” that larger operators have been unaffected by price-cutting efforts of late entrants when in fact, alternative methods to pricing have been used for competitiveness. 

MTN says, today, 5% to 10% of customers` monthly minutes of use are unbilled. “Failure to consider this model as a key differentiator in the South African market renders benchmarks against other African markets, where price is still the main indicator of competitiveness, inaccurate.”

Vodacom responds

Vodacom`s head of corporate affairs, Richard Boorman, says the report presents a common misconception regarding mobile termination rates (MTRs) that must be dispelled. “When MTRs are discussed, the comment is often made that the cuts weren`t passed on to the consumer. It`s not as straightforward as that. MTRs are not an industry-wide cost that the consumer bears – the net cost of MTRs to consumers is and always has been zero.”

He says for some networks, including Vodacom, the revenue from MTRs is greater than the cost, making the operator a net recipient of revenue from MTRs. “Other networks pay out more than they receive – these networks, therefore, benefit from lower MTRs.” Boorman says Vodacom loses revenue when MTRs are cut and as such the operator does not have any savings to pass on to customers.

Boorman says, however, that lowering MTRs does stimulate competition. “Has it worked? In our interim results announcement for the current financial year, we stated that our average effective price per minute in SA has fallen 24% year-on-year.”

He concludes that it is also “incorrect” to look at pricing in different countries without comparing quality and coverage. “SA has some of the most advanced networks in the world and extremely high population coverage. There is a proven link between Internet penetration and GDP growth, and since SA has less than one million ADSL lines, it`s clear that the only data connectivity available to the majority of the population is mobile. Building networks to support this isn`t cheap, and this has to be factored into cross-border comparisons.”