Extraordinary events took place behind the scenes in SA’s cellphone industry in the past week. Alan Knott-Craig played his first hand as Cell C CEO, slashing prepaid voice prices, and Vodacom reacted almost immediately with new rates of its own. But then the bigger operator botched its counter attack by attracting the wrath of the regulator.
It’s the sort of skirmish we haven’t seen in SA’s mobile industry in years. At 10am last Wednesday, Cell C issued a press release, under embargo until midday, that looked set to shake the telecommunications sector to its foundations. The company was slashing the cost of voice telephony to 99c/minute (billed per second from the first second).
Knott-Craig was clearly relishing the announcement and the impact it would have on Cell C’s rivals. “Price is not a strategy, but it sure beats the hell out of strategies based on high prices,” he said provocatively in the release. It was vintage Knott-Craig, who is known for speaking his mind even if it sometimes means being politically incorrect.
But a few minutes before the Cell C embargo was about to expire, Vodacom issued a press release of its own, titled “Vodacom rocks prepaid with Freedom 99”, in which it announced it was also slashing the cost of prepaid voice telephony to 99c/minute (though in its case without the per-second billing offered by its smaller rival).
It appears Vodacom had been forewarned and was moving quickly to undermine its rival’s big announcement.
Though Vodacom’s pricing was based on per-minute billing for the first minute (and billing in 30-second increments thereafter) — making its deal more expensive than Cell C’s — it also threw in 60 free minutes for use between midnight and 5am if users topped up with R12 or more. On the face of it, it seemed like a smart move by Vodacom, if perhaps a little reactive.
But then things went pear-shaped. TechCentral heard from a third party not affiliated to either operator that the Independent Communications Authority of SA (Icasa) was miffed that Vodacom had not followed the correct regulatory procedures when it announced the new tariff. When introducing new tariff plans, operators have to file these with Icasa at least seven days before their implementation. In Icasa’s eyes, Vodacom had broken the rules.
Vodacom reacted, saying Freedom 99 was not a new tariff plan but rather a time-limited “promotion” and as such did not need to be filed beforehand with Icasa for approval. Yet the original press release did not once use the word “promotion” to describe the offer, which was to be introduced in costly full-page advertisements in the Sunday newspapers.
At some point last week — from what I can gather it was on Friday — Icasa wrote a formal letter of complaint to Vodacom warning the operator that if it did not withdraw the plan and re-file it for approval, it would seek an urgent interdict from the courts. Late on Friday night, Vodacom issued a terse statement: “In a press release dated 16 May, we mistakenly referred to the Freedom 99 promotion as a new tariff. The correct wording should have referred to this as a promotion based on the All Day Per Minute price plan. We apologise for this mistake.”
But that wasn’t the end of the matter. At the eleventh hour, Vodacom was forced to pull the campaign from the Sunday papers and, though the “promotion” is now available, it has scrapped the “Freedom 99” branding.
The whole incident raises questions about whether the regulator should be pre-approving tariff plans in a competitive market. It also leaves egg all over Vodacom’s face. Knott-Craig must be relishing every moment of it. And to think this skirmish is just the start of what could develop into a full-blown price war in the months ahead. — (c) 2012 NewsCentral Media
- Duncan McLeod is editor of TechCentral. This column is also published in Financial Mail