Vodacom agrees to slash data prices by 30%

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Vodacom has reached a multi-year agreement with the Competition Commission, promising to substantially reduce monthly data bundles by over 30%, and saving consumers R2.7 billion in data costs.

Speaking at a media briefing this morning in Pretoria, competition commissioner Tembinkosi Bonakele said, effective from 1 April, Vodacom’s data price will significantly come down across all channels, and customers that buy the lowest volumes of data, typically the poorest customers, will see the greatest benefit of these price decreases.

“Effective from April 2020, Vodacom headline data prices will come down by over 30%. For example, the key 1GB monthly data bundle will drop from R149 per 1GB to no more than R99 (including VAT). This represents a 34% price decrease.

“Vodacom shall extend personalised discounts to prepaid customers in all suburbs and villages where most of the population have income levels below the upper-bound food poverty line. This will cover more than 2 000 localities, as defined in the agreement.”

In addition, Vodacom has committed to make available all of its current zero-rated services on one platform, through its ConnectU, service, which will provide two free SMSes daily to all prepaid customers who had at least one revenue-generating activity in the preceding 30-day period.

The agreement will be phased in within two months from 1 April to allow time for the necessary technical testing and implementation, noted Bonakele.

In its Data Services Market Inquiry report released in December, the commission threw a curve ball to MTN and Vodacom, recommending they reduce their mobile data prices by 30% to 50%.

At the time, the competition watchdog, which had been investigating data pricing in SA since 2017, noted that based on the evidence before it, “we find that price-based competition is inadequate, the challenger networks of Cell C and Telkom Mobile are unable to effectively constrain the two first movers, and that Vodacom has substantial market power, with MTN to a lesser degree”.

It ordered the two telcos to independently reach an agreement with the commission within two months on a reduction in the headline prices of all sub-500MB 30-day prepaid data bundles to reflect the same cost per MB as the 500MB 30-day bundle.

The commission at the time stipulated the agreement would be given formal legislative or regulatory effect within six months.

From left: Minister of trade and industry Ibrahim Patel, Vodacom Group CEO Shameel Joosub, commissioner of the Competition Commission Tembinkosi Bonakele, and deputy commissioner of the Competition Commission Hardin Ratshisusu.
From left: Minister of trade and industry Ibrahim Patel, Vodacom Group CEO Shameel Joosub, commissioner of the Competition Commission Tembinkosi Bonakele, and deputy commissioner of the Competition Commission Hardin Ratshisusu.

Financial breather

Commenting on the announcement, Vodacom Group CEO Shameel Joosub said: “The agreement struck with the commission provides us with an opportunity to enter into a social contract with the regulators, our customers and the people of South Africa to bring down the cost to communicate and promote digital inclusion.

“We did this at a time when South African consumers are under increasing financial pressure and on the understanding that action will be taken by ICASA and government to auction high-demand spectrum. Delays in assigning spectrum and completing the digital migration have curbed the pace at which data prices could have fallen.”

Vodacom will also zero-rate access to select government sites to assist members of the public in accessing government services such as home affairs, ambulance services, education sites and government communication services, noted Joosub.

The telco says it will also expand its zero-rated offering to all schools, universities and TVET colleges across the country, to ensure learners and students enrolled in these institutions will be able to access relevant information free of charge via their portals.

On average, South Africans pay around $7.19 (R106) for 1GB of data, which is six times more expensive than what mobile users pay in other emerging economies, according to the State of Mobile Web 2019 report released by Opera.

Last month, ICT analysts told ITWeb that 2020 is poised to be the year in which SA could finally see data costs being significantly slashed.

They cited the three main factors expected to contribute to significantly lower data prices before the end of the year as: the commission’s mandating price reductions, the enforcement of the Independent Communications Authority of SA’s (ICASA’s) data regulations, and successful spectrum licence allocation, which is expected to be concluded by the end of this year.

The CompCom and ICASA have circled around each other for two years, with the competition watchdog pushing an attack on retail prices, while the regulator had opted for intervention at wholesale level.

Public pressure

Since 2016, South Africans have been complaining about the high price of data, with frustrations resulting in the social media campaign #DataMustFall, drawing the attention of politicians, the public and regulators, who have been putting pressure on operators to make mobile Internet access more affordable.

The working class, youth, students and women of SA are considered to be among those most marginalised by the widening digital divide.

In July 2017, the #DataMustFall furore led to ICASA announcing its intention to conduct an inquiry to determine the priority markets in the electronic communications sector, followed by the publication of the discussion document last year.

The Competition Commission joined the list of local authorities probing the high price of data services in SA, initiating its own inquiry in August 2017.

In April 2019, ICASA’s new data regulations came into effect, aimed at putting an end to automatic out-of-bundle billing and allowing users to rollover unused data, helping consumers keep more money in their pockets.

Arthur Goldstuck, MD of World Wide Worx, said in a previous interview with ITWeb, that the Competition Commission getting in on the act is the most useful contribution to lowering data prices we have seen so far.

“We should see prices for ad hoc or out of bundle data fall significantly in the second half of this year. However, due to representations made by the operators, and the delay in implementing the new rules, we can expect to see something like the glide path that was used to phase in reductions in the inter-connect fee a few years ago. This means we will see out of bundle data prices begin to fall this year, but it may take longer to see the full impact of new regulations,” explains Goldstuck.

Spectrum at last?

Mobile operators have been waiting for years for allocation of spectrum, in order to provide faster and more widespread high-speed data services. They previously claimed they will only be able to effect substantial reductions in data prices when they receive more high-demand spectrum, and in its preliminary report, the Competition Commission has given notice it will hold them to this.

In his State of the Nation Address, president Cyril Ramaphosa stated ICASA is looking to conclude the spectrum licensing auction before the end of 2020, echoing sentiments expressed by ICASA’s CEO at the end of last year, saying the telecoms regulator plans to expedite the spectrum licensing process, with the intention to grant licences sometime this year.

“The issuing of high-demand spectrum to existing telcos will bring down their cost of providing data, which will also contribute to their willingness to bring down data prices. In addition, the commitment of the president to making communication more affordable makes lower data prices a national imperative, and that will provide the foundation for prices coming down this year,” explained Goldstuck.

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