Consumers win with new data bundle rules, but does MTN?
Says it has no problem with rule that mobile operators must allow customers to roll over unused data
MTN expects South Africa’s new data expiry rules to be “manageable” and believes data usage will continue to grow at a rapid pace, says CEO Rob Shuter.
He said MTN was studying the End-user and Subscriber Service Charter Regulations, which the Independent Communications Authority of SA (Icasa) published in April, and was in talks with the regulator.
The rules stipulate that mobile operators must allow customers to roll over unused data, and says MTN and its peers will also have to send notifications to consumers when their usage is at 50%, 80% and 100%.
Operators must also allow consumers to transfer data to others, while licencees will no longer be allowed to charge out-of-bundle rates for data when it is depleted without consumers giving “specific prior consent”.Excelsia Capital analyst Mark Narramore, who is largely bullish on MTN, said the potential impact of the rules on data growth was “a big risk”.
Shuter, however, said “parts of it [the regulations] are very sensible – things like notifications for customers; we do a lot of that already … but we will have to understand it all in a bit more detail”.
MTN, which cut its headline out-of-bundle data price to 60c a megabyte in November 2017, had been “working pretty consistently” in recent years to encourage customers to use data bundles. It was also largely prepared for the new regulations.
“We’re in reasonable shape. In markets where we’ve very aggressively brought the out-of-bundle rate down, we’ve discovered that the recharges are very resilient and so in other markets it’s not had such a big impact,” Shuter said.
In 2015, Nigerian regulators made a similar move to Icasa’s when they said consumers would have to opt into out-of-bundle rates.“That gave us a couple of weaker quarters and then the in-bundle [offering] came through and passed the total revenue of where we’d been a couple of quarters before, so we do believe the situation is manageable and we’ve made the moves we need to.”
While there were uncertainties about how the new rules would affect usage, MTN saw “a lot of headroom for growth in data” in SA, Shuter said.
“We see relatively low penetration of active data customers on the total base, we see relatively low levels of utilisation, and very little Wi-Fi substitution outside of the main metros.”
Lower out-of-bundle rates had not weighed materially on MTN’s revenues in the three months to March, Shuter said.
“I think generally that money has come through in other categories so I don’t think we would say it’s made a significant impact on [revenues].”
MTN grew service revenues in SA slower than expected in the first quarter, though it grew margins. The local business increased service revenues by 2.5% while margins lifted by 150 basis points compared to a year before.
Imtiaz Suliman, portfolio manager at Sentio Capital, said the SA revenue result was “a bit weak”, although the growth in prepaid and postpaid subscriber numbers would likely boost revenue growth in coming quarters.