Local market analyst firm Africa Analysis is expecting the prices mobile data in South Africa to shoot up this year.
The firm conducted an analysis of where it thinks the 30-day mobile prepaid data bundle prices are headed given the prevailing market conditions in the country.
Africa Analysis notes that the price of the month-to-month bundles is calculated based on the total amount of data (anytime, promotional, and night-time data) included in the packages, and is also inclusive of value-added tax.
The focus of the analysis is based on the leading mobile operators – Cell C, MTN, Telkom and Vodacom – that offer monthly prepaid capped data bundles.
“Through our comprehensive pricing database, we have observed three significant cycles of price reductions over the past 18 years,” says Ofentse Dazela, director of pricing research at Africa Analysis.
According to Africa Analysis, during the first cycle – 2005 and 2011 – the median rate per GB declined from R880 to R335.
This represented the biggest decline at the time of 61.9%, it says, adding that this period saw 3G launched in 2005 and rolled out across the country.
Dazela points out that the second cycle saw the launch of LTE in 2012 that led to the introduction of various LTE packages between 2012 and 2019.
“This uptake spurred price-based competition, paving the way for more price cuts in this seven-year period. The median rate declined by 29.5%, from R244 per GB to R172.”
Direct intervention
The third and current cycle, starting in 2020, has seen further prepaid data rates cuts through December 2023, partly because of direct intervention by the Competition Commission, the firm says.
The median rate per GB fell from R129 to just under R70 by the end of 2023. This amounted to a decline of 45.4% during this period, it states.
“Since 2005, we have tracked seven prepaid data bundles in our pricing database, namely the 100MB, 250MB, 500MB, 1GB, 2GB, 5GB and 10GB. By December 2023, the overall median price per GB of these bundles had declined by 88%,” Dazela says.
“However, the 30-day prepaid data bundle prices have remained relatively flat in the past two years, with the median rate declining by only 5.4%, from R74 per GB to R70 per GB.”
Overall, Africa Analysis says the median rate per GB of the 30-day prepaid bundles saw a compound annual growth rate of -13% per annum between 2005 and 2023, underscoring significant price cuts over this period.
“Over the years, operators have implemented significant price cuts but the question on everyone’s mind is whether there is still room for further price cuts in the prepaid data segment?” Dazela notes.
He adds that the release of additional spectrum created a market expectation that this would lead to accelerated price decreases of mobile data.
“However, several factors have acted against this expectation and continue to do so – the persistent weak economic climate characterised by subdued consumer spend; inflationary pressures; weak rand to US dollar exchange rate; and unabating episodes of load-shedding.”
Dazela believes that operators have and will continue to grapple with increasing operational and capital costs.
“For example, in a bid to protect revenues, operators will likely continue to roll out expensive additional measures, such as buying more back-up generators for mobile towers that are intended to lessen the impact of erratic load-shedding episodes, to improve network stability and consumer experience.
“South Africa has experienced the most extensive episodes of load-shedding in last two years (2022/23) and it most certainly appears that load-shedding will still be with us for some time going forward. Additionally, vandalism or battery theft results in further (previously unplanned) expenses.”
Strong suggestion
Africa Analysis believes all these factors strongly suggest that prepaid data prices could rise in the immediate future, thus bucking the past 18-year trend of price declines.
“We are, therefore, likely entering a fourth and new cycle that is characterised by price increases in the short-to-medium term. Consumers should prepare for price increases from the operators.”
Comparing the 30-day mobile prepaid data bundle prices of the leading operators, Dazela tells ITWeb via e-mail that Telkom did overhaul its 30-day prepaid mobile data bundles some time ago.
He points out that Telkom currently offers 60-day mobile prepaid data plans, as well as prepaid offerings with 180 days validity period.
From a pricing perspective, he adds, Telkom’s 60-day mobile prepaid data plans offer a lot more value to customers when compared to other 30-day mobile prepaid packages available in the market at an average price of R33.32 per GB.
“Vodacom is at the other side of the spectrum with the average price its 30-day prepaid (once-off) offerings at R96.75 per GB,” Dazela concludes.
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