Despite a cloud of regulatory uncertainty hanging over SA's mobile landscape, a surprise move by MTN - usually the last to react to competitors' salvos - has put coal on the price war fire.
This is according to industry observers and comes after MTN yesterday announced its 79c per minute prepaid promotion has been made permanent - stealing the thunder from "consumer champion" and price-cut ringleader Cell C, which introduced what it had trumpeted as the country's "lowest guaranteed flat call rate" of 99c in 2012.
While Telkom Mobile's SIM-Sonke product (introduced in July last year) offers off-net prices of 75c per minute, the operator - which held 2.2% of the market in September - does not have as extensive a footprint as its larger counterparts.
MTN's uncharacteristic move comes just after the company released its latest quarterly update, which saw its prepaid subscriber base take a knock. IDC analyst Spiwe Chireka puts this down to the fact that the yellow operator has been reluctant to respond to lower tariffs introduced by other mobile players.
Price war II
Chireka says after MTN's latest results, the operator had no choice but to react with a lower tariff. "It was necessary for MTN to make its three-month 79c promo permanent. They have always been the last ones to respond in the price war and, looking at their last annual results, it is clear they now have to join the race."
She says the move bodes well for consumers, with Cell C expected to drop its previously lowest rates. "Cell C's 99c advantage has gone. I expect they will match MTN's tariff - or even go slightly lower. The price war is back and this time it's even better, because it's a permanent tariff war, not a three- or six-month promotion."
The next two months, says Chireka, is a critical period for MTN's rivals. "Vodacom will also have to respond if they want to keep their prepaid base. I don't know how they will react, but if they just look at what [not reacting] has done to MTN, we are likely to see new tariffs soon."
Ovum analyst Richard Hurst says the overarching issue highlighted by MTN's quarterly results is that the local market is becoming increasingly competitive, with pressure on revenue growth and profit margins coupled with regulatory pressure in the form of the new mobile termination rates.
Hurst says it is very clear the mobile price war - instigated by Cell C when Alan Knott-Craig took the reins two years ago - is heating up again. "It's good to see MTN is at least taking initiative and we can be very sure others will emulate these rates."
He says it will be interesting to see how the scenario plays out. "The issue is just how far lower tariffs can go before it starts eating into margins. We have to find the floor in terms of these tariffs."
Africa Analysis analyst Dobek Pater says one of the main factors that sparked MTN's aggressive tariff move - its falling prepaid user base - is typical of a mature market, especially one like SA. "MTN's loss of subscribers is due to the lower prepaid prices launched by Cell C and Telkom Mobile. Price-sensitive prepaid subscribers often move to the cheapest offer in the market."
MTN SA yesterday reported subscriber attrition of 824 768 - taking its base below the 25 million mark, down to 24.9 million.
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