SA's broadband price war is truly on, as mobile operators battle it out to offer the cheapest broadband prices possible, in a bid to secure a bigger slice of the data market - with the consumer standing to benefit from tumbling prices.
Local broadband costs have long been slammed as too expensive to allow many people to connect to the Internet on the go. However, costs are now falling significantly, a trend that will continue until the middle of next year as operators rush to gain new subscribers.
SA's voice market is already saturated, with a mobile penetration rate of about 107%. There are more than 50 million SIM cards in circulation, and about 38 million cellphone users, out of an economically active population of 13 million citizens.
As a result, data is the next big thing for mobile companies, and is showing phenomenal growth.
Yesterday, Vodacom released its quarterly update for the three months to June, saying data revenue leapt 38%, compared with total turnover growth of 8.1%. MTN has experienced a similar trajectory. In its year-end results to December, it reported revenue up 14%, but data skyrocketed 33%.
Cutthroat pricing
SA's major cellular providers have all recently slashed rates after 8ta fired the first salvo on 24 June. The operator, Telkom's mobile arm, launched a limited-time offering, pricing its data bundles at about 1c a MB.
8ta is offering two variations to its promotion. The first is a 10GB bundle for anytime surfing at R199 per month, equal to 1.9c a MB. Its second deal is R299 a month for a 10GB bundle and another 10GB for use between midnight and the early hours of the morning.
The 10GB special offer, which works out to a cent a MB, is the lowest mobile broadband rate available in SA, 8ta's managing executive, Amith Maharaj, said at the time.
MTN hit back earlier this month, trimming the cost of its uncapped broadband packages. It now offers Broadband Uncapped Lite at R299, less than half the previous cost, and MTN Broadband Uncapped Pro fell from R1 999 to R899.
Since then, both Vodacom and Cell C have launched new offerings, which kick in next month.
Vodacom's new cheapest per MB packages are its 10GB and 20GB deals, which work out to 7c a MB if subscribers take make use of the Night Owl midnight to 5am deal, which doubles up the data bundle.
Cell C has also joined the war, pricing its new offerings from 3c a MB. For 10GB of data a month, users will pay R499, or R4 999 once-off for a year's use.
Executive head of marketing Simon Camerer says: “Cell C has heard the call from SA consumers and small business owners to provide larger bandwidth products at competitive prices to help them meet their own day-to-day Internet access demands.”
It ain't over
Richard Hurst, senior analyst of emerging markets at Ovum, says mobile operators will keep dropping prices until about the middle of next year. He says the cellular companies have to make the move to data, which is “the new battleground”.
Hurst explains data is where new growth in revenue will come from as the voice market is saturated. Although mobile broadband offers lower margins than voice revenue, it is a shift that has to happen, he adds.
The fall in prices will be “good news” for consumers as SA is “way more expensive” than its peers in other emerging markets, says Hurst.
“This is war, but it ain't over yet,” adds Denis Smit, MD of BMI-TechKnowledge. Although “delighted” at the price competition, Smit points out mobile broadband prices can still come down some more.
Affordability is the single biggest obstacle to broadband use in SA, says Smit. The only way prices will keep coming down is through competition, which will intensify, he adds. “In a year's time, you'll be amazed at the prices.”
Data revenue is growing dramatically as South Africans are bandwidth-starved, says Smit. Broadband is the “next big” growth area for mobile companies and they are cutting prices to bolster subscriber bases, he says.
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