Ball is now in 8ta’s court

2010-10-23 09:37

The entry of Telkom’s mobile ­network ­operator, 8ta, is unlikely to lead to lower cellphone bills for consumers. Competition in telecommunications, as witnessed by the introduction of Cell C for mobiles and Neotel for land lines, does not make prices fall off a cliff.

Even the impact of regulation appears to be muted as consumers are still looking for the savings they were supposed to make after cellphone operators started to ­reduce interconnection fees to 89c from R1.25 per minute earlier this year.

Interconnection rates are the fees mobile network operators charge each other to carry one ­another’s calls.

David Lerche, a telecoms analyst at Avior Research, said: ­“Consumers have not seen a real price reduction since the interconnection fees were cut this year.”

When the interconnection rates were reduced, Cell C introduced a product that charged ­consumers R1.50 per minute to make calls at any time of the day.

Vodacom then responded with a package costing R1.80, while MTN charged R1.75.

“The whole point of reducing ­interconnection fees is to try to ­encourage competition in the ­telecommunications space and have new entrants offer consumers cheaper products,” said Lerche.

What is happening is that mobile network operators such as ­Vodacom and MTN have been ­intensely ­marketing products that encourage consumers to make free calls at awkward times, for ­instance, in the early hours of the morning.

Lerche said 8ta could make a much stronger impact by dropping prices.

National Consumer Forum chairperson Thami Bolani said he hoped 8ta would result in reduced tariffs.

“The ball is now in 8ta’s court. The magnitude of the drop in ­mobile tariffs will depend on its leadership.

“Lower tariffs will force their competitors to reconsider their prices,” Bolani said.

Lerche said the operator had a better chance of significantly ­impacting the market compared to when Cell C started because ­Telkom had an established ­telecommunications infrastructure and distribution capacity for its products.

“When Cell C started operating, it did not have its own infrastructure, and consumers struggled to find the product in stores,” he said.

He said Neotel, Telkom’s only competitor in fixed-line telecommunications, was mainly focused on offering telephone packages to businesses instead of consumers.

This focus appears to be in line with international trends.

BMI-TechKnowledge analyst Fezekile Mashinini said: “Neotel has recently stated that the ­consumer market will remain only 10% of its revenues, an indication that mobile operators are the only ones gaining ground in the ­consumer market, as is the global trend.”

This suggests that consumers are likely to see price benefits in mobile telephony ahead of land lines.

Mashinini said Cell C always did its best to be innovative.

“An example is when Cell C ­introduced a package such as Woza Weekend, which is now Woza ­Weneva, a product that shook the market,” he said.

The Cell C customer base has been experiencing a steady ­increase, but the company has, ­until now, struggled to capitalise on the broadband data market.

“With their recent launch of broadband offerings, they have shown the same innovation, which has the potential to put them on an even footing with Vodacom and MTN,” said Mashinini.

Cell C’s wider offering and the launch of 8ta should lead to fierce battles for a share of the customer’s wallet. But this battle may yield better offerings instead of lower prices.

“It will take time for further price reductions to filter through, which will probably be precipitated by more intense competition rather than as a result of interconnection rates alone,” said Mashinini.

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