Over the last week, mobile data prices in South Africa took centre stage again, with Communications Minister Stella Ndabeni-Abrahams’s being tasked with reducing data prices by 50%.
Twitter users also complained about high prepaid costs through the hashtag #NoRechargingForMTN, and it was further blamed for stifling SME growth.
The narrative that “South Africa has some of the most expensive data rates on the continent” has become so entrenched that it is sacrilegious to challenge it.
The reality, however, is that this claim is inaccurate – as it only applies to selected products from selected mobile operators.
It is easy to cherry-pick specific data products from a South African mobile provider and then compare it to more affordable data products from an international operator.
This is an unfair comparison and does not look at the overall value proposition which users receive.
If you compare like-for-like products, it quickly becomes clear that we enjoy some of the continent’s best-priced mobile data products.
For example, South Africans can buy an unlimited 4G service for their phones for under R300 per month. We could not find a better deal anywhere in Africa.
Rain’s unlimited 4G for your home or office for R479 per month also offers unmatched value-for-money.
South Africa also has some of the lowest prices on large data contracts like 20GB or 50GB per month.
The claim that South Africa has some of the most expensive data rates in Africa is therefore misguided and even dangerous, as it can lead to undesirable actions from an uninformed government.
Competition and choice
What is often overlooked in mobile data pricing comparisons is the overall value proposition of a data product.
Network quality and coverage are key components of a mobile data offering and it should be considered when comparing prices.
To build a high-quality national network with good coverage costs tens of billions and should demand higher rates than a patchy network with mediocre speeds.
Vodacom and MTN’s networks are by far the best in Africa thanks to their much higher network investments.
Their capital expenditure (Capex) in South Africa dwarfs that of their other African operations.
It is, therefore, no surprise that Vodacom and MTN charge more for some of their mobile data products in South Africa than in other countries.
Vodacom and MTN also outspend all of their local competitors – Telkom, Cell C, and Rain.
This means the two mobile giants have far higher speeds and better coverage than their competitors.
In turn, the lower network investments from smaller operators allow them to be more competitive on price to appeal to the price-sensitive segment of the market.
And this is the beauty of competition – South African consumers have the luxury of choosing between a range of products with varying speeds, coverage, and prices.
This is exactly how a free market should operate. Companies should be allowed to build products which they think people want, and then charge what they think people are willing to pay.
What has happened in South Africa, however, is that consumers and politicians are putting pressure on Vodacom and MTN to cut prices.
They want to force the two mobile giants to offer their Ferrari-level data products at Kia-level prices.
What is seldom mentioned is that the best way to force a company to cut prices is to support their competitors – vote with your wallet.
If you do not like Vodacom or MTN’s prices, simply move to Rain, Telkom, or Cell C. You can even move to one of the many MVNOs with better prices.
If you are not willing to move, it is a feather in the cap of Vodacom and MTN for offering such an excellent service that you continue to support them when there are much cheaper products available.
The notion of regulating mobile data prices is counterproductive and will reduce competition, remove choice from consumers, and result in lower-quality networks.
Here are the facts
With so many opinions on the topic, it is important to look at the facts regarding pricing and network quality.
Vodacom’s local and international operations provide an excellent benchmark for mobile prices and network quality.
The data shows that Vodacom’s prepaid data prices are higher in South Africa than in its other operations.
For large data packages, however, prices in South Africa are much lower than in other countries where Vodacom operates.
The data further shows that Vodacom’s 3G and 4G coverage in South Africa is much better than in any other of its operations.
What is also important to note is that Vodacom has less spectrum in South Africa than in its international operations.
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Source: mybroadband
