Prepaid cellular airtime resellers have already experienced a loss in turnover and are bracing themselves for a further reduction in their bottom line when the networks release the new prepaid rebate margins tomorrow.
Hein Viljoen, chairman of the Prepaid Resellers Association (PRA), says resellers have already been feeling the pinch.
"Resellers have already experienced around a 30% drop in turnover over the last month as wholesalers have been selling airtime at adjusted prices. Added to that, the networks have introduced a quota system to stop wholesalers stockpiling. Any purchases which exceed the quota have been sold at a higher price, which is then passed down the channel," he says.
The networks have said that while they are sympathetic to the resellers` grievances, the cellular market is maturing and slimmer margins are inevitable.
MTN appears to have offered a reprieve by giving incentives for increased sales in starter packs, and Viljoen says Cell C has agreed to look at reseller business models to see whether anything can be done.
Vodacom is the only operator not to have met with the PRA over the issue. However, it did say in a statement that the vast majority of Vodacom`s resellers do not have prepaid airtime as part of their core business, and it was therefore doubtful that any reseller of airtime would have to cease operations due to adjustments to the tariff structure.
The impact of the reduced rebates has been that resellers are paying higher margins, with some resellers losing hundreds of thousands and in some cases over a million rand in turnover as retailers stop selling airtime, Viljoen says.
"Smaller retailers are shutting off reseller vending machines because the knock-on effect down the channel means it is not worth while for them to run the machines," he says.
After the networks release the adjusted rebate margins tomorrow, says Viljoen, resellers could lose up to 50% on their bottom line.
He says the increased margins have also taken their toll on the hawking community selling airtime. "One reseller represents 146 000 registered hawkers who have been making R500 to R1 000 a month on selling airtime from their cellphones. They will now experience a cut to a few hundred rands a month."
Not only are resellers` vending machines being shut down, says Viljoen, the decreased margins are also increasing the sale of airtime at illegal prices. "Airtime is already being sold for more than the regulated price in some areas and the rural areas will be particularly hard hit by this when the margins are decreased," he says.
MTN has said it will offer incentives for the sale of starter packs and rebates for airtime used on those phones thereafter. However, Viljoen says this will be of little benefit to the resellers.
"Firstly, companies will have to push large volumes of starter packs to make turnovers, and secondly, the rebates are only seen a couple of months down the line," he says.
Added to that, Viljoen says resellers do not see increase in turnover as the number of cellphone users increases as the number of resellers has increased proportionality with the growth in the market.
"So while resellers will try and diversify their business, many of them will have to negotiate with the banks to pay off their loans over a longer period of time," he says.
Related story:
Resellers fight decreased prepaid margins
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