Vodacom agrees to slash data prices - now it’s MTN’s turn

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Vodacom agrees to slash data prices - now it’s MTN’s turn

The deal means a 1GB monthly bundle will drop from R149 to ‘no more than’ R99, among other initiatives

Mudiwa Gavaza
Vodacom’s annual data revenue of R24bn accounts for 43% of its SA sales, according to its latest financial results.
Money spinner Vodacom’s annual data revenue of R24bn accounts for 43% of its SA sales, according to its latest financial results.
Image: Reuters/Siphiwe Sibeko

Vodacom has reached an agreement with SA’s competition watchdog to reduce its mobile data prices.

One of the initiatives SA’s largest mobile operator will institute is cutting the cost of its 1GB monthly bundle from R149 to “no more than” R99, a 34% reduction, from April 1 2020.

Vodacom group CEO Shameel Joosub said the operator would introduce a range of initiatives that would result in R2.7bn in additional savings for customers.

“This forms part of a broader Vodacom group programme to create a social contract with its stakeholders that will address pressing societal challenges in each of the markets in which it operates,” he said.

Vodacom’s share price was up 0.79% to R108.56 late on Tuesday morning.  

The agreement, which was announced at a briefing in Pretoria on Tuesday, is likely to be seen as a victory for consumers, whose social media and street campaign against expensive data gained traction in 2017 when the Competition Commission set up an inquiry into the sector.

After two years of investigation the commission released its data market inquiry report in December 2019.

The commission’s final report said MTN and Vodacom had to independently reach an agreement with the regulator on substantially reducing data prices within two months of the release of the report.

For MTN and Vodacom, which control about 70% of the SA mobile industry, it comes as a blow to one of their biggest profit sources.

The commission said there was scope for price reductions of 30%-50%.

Commissioner Tembinkosi Bonakele said at the briefing that Vodacom would extend the number of zero-rated websites and services it supports, including more than 20 specific government-related sites around services such as education and healthcare.

He also said certain parts of their agreement with Vodacom would be kept confidential to protect the operator’s competitive position in the market.

The competition watchdog gave the two dominant mobile operators two months to slash internet connectivity prices or face prosecution.

This deadline was subsequently extended to the start of March.

Vodacom’s annual data revenue of R24bn accounts for 43% of its SA sales, according to its latest financial results.

For MTN and Vodacom, which control about 70% of the SA mobile industry, it comes as a blow to one of their biggest profit sources as data sales constitute an important source of their revenue in SA.

The findings have also turned the spotlight on the government’s failure to auction spectrum – a radio frequency that allows mobile operators to send voice and data over the airwaves – which mobile operators have long argued is vital to bring the cost of internet data down.

At the end of 2019, the Independent Communications Authority of SA (Icasa), the industry regulator, said it would start auctioning spectrum for both 5G and 4G bands in the second half of 2020.

All eyes are now on MTN and what agreement it has come to with the commission.