It’s no secret that despite having the longest-standing mobile networks on the continent, SA still has some of the highest mobile call rates in Africa. This week, Cell C went some way to correcting that when it announced it was cutting prepaid rates, and hinted that new post-paid pricing will follow soon, but there’s arguably still a long way to go.
On Wednesday, Cell C announced it was dropping prepaid call rates to 99c/minute regardless of the time of day or destination network. Within minutes, Vodacom responded with its own price cut, that appeared, at first glance, to match Cell C’s rate.
Vodacom’s offering, however, sees customers billed 99c for the first minute, and then in 30-second increments thereafter. Cell C’s new prepaid plan, on the other hand, is billed per second from the first second, making it much better priced and, more importantly, the more transparent of the two offerings.
Some of the reason Cell C was able to make the price cut is that it enjoys preferential mobile termination rates — the fees networks charge one another to field calls on their networks. Because Cell C has less than 20% market share, it pays a lower fee to Vodacom when receiving a call from a user on the latter’s network than the fee it has to pay when the reverse takes place.
Vodacom argues it’s sweetened the deal by offering customers who recharge with R12 or more an additional 60 minutes of talk-time between midnight and 5am. The problem is, these bonus minutes are only applicable to on-net calls — that is, calls to other Vodacom users.
While this may be of value to Vodacom users that have a long commute that requires them to rise before 5am, they still need to ensure that the person they’re calling is on the same network — and that they’re awake. With consumers having the ability to change networks and keep their number, it’s quite difficult to check if a call is, in fact, to a user on the same network — a number with a Vodacom prefix like 082 need not mean a Vodacom customer.
Compared to Cell C’s straightforward offering, Vodacom’s is still rather opaque. And the value-add of free minutes is of limited use to most customers. Moreover, on a per-second basis, it’s simply more expensive.
Cell C must be lauded for the simplicity of its new offering, preferential termination rates or not. Aside from the cheaper rates, it’s the lack of obfuscation that really sets the bar other operators should be aiming to match.
MTN, meanwhile, has said it won’t be drawn into the price war, claiming that its “MTN Zone” plans mean its rates are already the most affordable in the market because it offers customers “free calls” through its “Mahala Thursday, Mahala Nights, Mahala Weekends and Mahala Day” time-based rates.
That’s four separate pricing schemes with which consumers need to familiarise themselves if they’re to take advantage and save money. MTN’s pricing is arguably the most impenetrable of all the major players.
It’s precisely these convoluted pricing plans that confuse consumers and allow operators to capitalise on consumers’ inability, or lack of desire, to attempt to decode the jargon and minutiae that has long pervaded SA mobile services.
Consumers want simplicity and, in a market where disposable income and education levels span a gamut far broader than those of developed countries, the operator that can offer the most transparent and cheapest packages deserves the biggest market share.
Cell C’s CEO Alan Knott-Craig has hinted that contract subscribers can expect price cuts soon and hopefully these will be similarly simple to understand and force both Vodacom and MTN to react. If they start seeing customers churning over to Cell C, you can bet they’ll respond in kind.
Pricing of both voice and data needs to get to the level where operators are forced to compete on quality of service and unambiguous value-added services. With mobile termination rates set to fall again, and the Independent Communications Authority of SA having said it will continue to assess the rate beyond next year, retail price competition is going to intensify.
At the end of the day, price cuts are good for operators and consumers alike. Consumers save money and operators are forced to innovate. In a mobile landscape like SA’s, where the incumbents have been able to make huge profit margins on voice and data for a decade and a half, this price war hasn’t come a moment too soon.
Prices have a long way to fall, but at least someone’s made the first, crucial push to lower them. — (c) 2012 NewsCentral Media