Some of the broadband packages being offered by mobile operators are not sustainable in the short or the medium term but may become so in a few years once mobile networks based on long-term evolution (LTE) technology become more pervasive.
That’s the view of MTN SA MD Karel Pienaar, who says some of the promotions in the market, such as 8ta’s offer of 10GB of data for R199/month, are below cost and will remain so for at least the next year or two.
However, Pienaar welcomes the increasing competition in mobile broadband, saying it’s “warmed up the market quite nicely” and “there’s nothing like this sort of aggressive competitive activity to grow the market”.
Cell C, and most recently 8ta, which is owned by Telkom, have shaken up the mobile data market in the past year with deeply discounted data offerings that have taken the cost-per-megabyte to around 2c. 8ta this week upped the ante with a new 2GB prepaid product for R149, offering an additional 1GB for use late at night.
Vodacom and MTN reacted with 2GB/month specials costing R149/month on contract (with a modem) and the former recently cut the cost of its broadband bundles, though the new prices are still well above the levels offered through special offers.
Cell C said last week it would end its promotional offers, in the market for the past year, but is expected to launch new products later this month. It’s not yet known how aggressively priced they’ll be.
“The biggest impact of both of these companies is it’s put us into a price spiral a little,” Pienaar says. “Their offerings have been hugely aggressive. Their coming into the market has grown the market and has driven prices down and that’s the nature of competition.”
Over time, though, Pienaar thinks the prices being offered as part of special offers may become sustainable. “Using LTE, my efficiencies are 1 000 times better,” he says. “But for the next year or two, that pricing is well below cost.”
He says the price competition is “absolutely superb” for consumers and “for the country”. It will “increase access to the Internet at a tempo that is superb for all of us.”
Pienaar emphasises that operators like MTN must urgently be given access to new radio frequency spectrum to ensure they are able to deliver the bandwidth that consumers will demand in the next few years. “I’m really hoping spectrum is allocated on the basis of who can benefit consumer the most and in the most efficient way.” — Duncan McLeod, TechCentral
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