SA needs to ring in changes on tariffs

2012-04-21 13:32

It’s official. South Africans pay ­higher prepaid mobile prices than the citizens of 30 other African countries.

A recent report by Research ICT Africa offers damning insights into the pricing structure in which South African mobile operators do ­business.

The report, “Africa Prepaid ­Mobile Index 2012”, reveals South Africa is among the most expensive in Africa.

The report, based on an in-depth study of 46 African countries, sought to examine how affordable prepaid telecommunications services on the continent are. The report does this by looking at operator ­tariffs submitted to regulators.

Since pricing is the key indicator of market competitiveness, South Africa’s industry is clearly in need of a review of its tariff structure, as it ranks 30th out of 46. Prices in some of Africa’s largest economies, like Egypt and Kenya, are a mere ­fraction of the lowest rates charged in South Africa.

The report says South Africans pay three times more than their ­Namibian neighbours for the same products.

Cost savings in South Africa are not passed on to the consumer – ­instead the upside goes to the ­operators – with MTN creaming the ­largest profit.

The report says this is possible ­because there is very little pricing transparency in South ­Africa.

For example, it was found that in South Africa, “even the modest ­reductions imposed on termination rates have generally not been passed on to end users”.

The report says “8ta was the cheapest operator in the country ­until August 2011, when Cell C ­introduced its 99c tariff, ­making Cell C the cheapest operator in the­ country”.

MTN is the most expensive ­operator. The report says MTN’s cheapest product was far more ­expensive when compared to that of its competitors.

“South African operators do not compete for price and the dominant mobile operators, Vodacom and MTN, have been able to withstand the pricing pressure from price cuts by later entrants, and all operators’ prices have settled around the levels set by them,” the report noted.

Vodacom and MTN say the basis of the report is flawed and very basic mistakes have been made by the ­authors. MTN has questioned the integrity of the report.

Executive for regulation ­Graham de Vries said that the study was ­“riddled with inaccuracies and miscalculations, and as a result, reaches conclusions that are flawed and do not reflect the pricing realities of mobile in South Africa”.

He adds that “the expectation that a reduction in mobile termination rates will immediately lead to a ­reduction in retail prices are based on incorrect assumptions”.

Vodacom’s spokesperson, Richard Bomann, said: “The study is ­fundamentally flawed when mobile termination rates are discussed, the comment is often made that the cuts ­weren’t passed on to the consumer. It’s not as straightforward as that.”

Alan Knott-Craig, Cell C chief ­executive, said: “An important element the study does not include is the different cost structure between the various countries.”

South Africa’s telecoms regulator, Icasa, said: “The report does not take into account the geographic ­network coverage of South Africa.”

The cheapest rates across the ­entire continent are found in ­Mauritius. 

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