SA paying ‘too much’ for mobile contracts

South Africa's mobile contract holders are reeling from the recent, unexpected mobile rate hikes by Cell C, Vodacom and MTN.

But the reality is that mobile phone contract holders have been paying too much for years.

All of us who have mobile phone contracts need to take a long, hard look at how we have been over-paying on our mobile bills for years and how this can be changed.

I’m paying for what now?

Mobile operators use various contract mechanisms to complicate monthly bills, and offer a dizzying choice of contracts, with lots of fine print. This leaves us with a complicated mobile market, incomparable contracts and deals, lots of extra costs, and confused subscribers landing up paying more than they should.

The paradox of choice

People tend to regard choice as a sign of a fair and competitive market. But we know from Steve Jobs that there is beauty in simplicity.  The local mobile industry is plagued by too wide a choice of products or services. Between the various mobile operators there are over 10 000 possible combinations of contracts and added bundles. How can your average user even begin to make sense of what to choose?

The not so ‘free phone’

There’s no such thing as a free lunch and certainly no such thing as a free phone – especially those fancy new smartphones that come with your next contract. Although there has been a move away from the language of ‘free phone’, the legacy remains.  Too many consumers don’t understand how much they are paying for the phone versus the minutes and megabytes that come with their contract, and there is a clear need for increased awareness regarding these costs.

Contract lock-in

Following their recent rate hike announcements, Vodacom – and now also MTN – customers are seeing red because many are stuck midway through a 24 month contract having to pay more than they bargained for. The painful lesson here is that once that contract is signed, whoever your provider is, you’re locked in for 24 months. If you realise midway that you could be on a better contract or network, you’re forced to sit it out while paying up monthly until the end.

Lack of transparency

What makes it hard to spot unfair pricing is the complete lack of openness among providers about contract rates. Cell C have tried to help with their simplified billing structure, but it unfortunately hasn’t caught on industry-wide. Millions of mobile users are left baffled by their monthly bills and what they’re really paying for their handset, data and calls and out-of-bundle usage, and why. They’re also left trying to make sense of other mysterious ‘content charges’ that show up everywhere.

Bundle deals

Contract deals can be more appealing than prepaid plans as they nearly always come with inclusive bundled value for voice minutes, text messages and data.  If you understand your own usage behaviour, you can shop around for the perfect package to suit your lifestyle. But if you don’t have the tools to know precisely what you need, you could be nailed by under-utilising your bundles, or worse, exorbitant out-of-bundle rates. Operators love these models because it allows them to better provision their networks based on estimated usage and to profit from people’s under- or over-utilisations of their bundles.

Punitive billing

Per second billing has thankfully finally become mainstream in SA. However, consumers may still get some nasty surprises on their monthly bill.  These include set fees for Caller Line Identification (CLI) and itemised billing that should really just be included in the contract to begin with. Customers also get burnt by handset and SIM insurance costs governed by strange fine print. Early cancellation of contracts also attract prohibitive cancellation fees.

Poor customer service

Without naming and shaming anyone, it is interesting to note that the two mobile players with the highest ratio of customer complaints on (97% complaints to 3% compliments), also have the lowest level of conversion of complaints into resolved matters. Their rates of turning unhappy into happy customers by addressing their complaints sit at 2% and 4% respectively. In fact, the industry average for resolving consumer complaints on is a shockingly low 4% over the past 12 months.

It’s time to take control

Why do mobile operators charge so much? Big mobile companies the world over have massive overheads to run their networks, buildings, staff, licences and extravagant marketing campaigns. Some explanations recently offered for mobile rates hikes by local operators include external inflationary pressures on company and network running costs, and the impact of the weak rand on the price of equipment and services that need to be bought in US dollars.

So where does that leave you?  Consumers don’t always know how to take control, but there is hope.

One option is to get professional help in assessing the complicated mobile contract and pay-as-you-go landscape to make better informed decisions. Doing this, you can save up to 40% off your cell phone bill.

Cash-strapped consumers can also combine low, usage-based rates with month-to-month payment options or shop around for their own phone instead of paying off a contract phone (over and over again) and to simply buy talk time and data as they need it. There is a multitude of affordable handsets available on the market these days which provide good value for money.

READ MORE: UPDATE: MTN's price increases revealed

Another very exciting development in the South African mobile market, that consumers need to look out for, is the rise of more innovative and niche mobile virtual network operators (MVNOs) like we’ve seen booming in markets like Germany, Belgium and the US. The likes of Mr Price have already launched theirs.

Another brand new MVNO, with a unique new business model that is set to shake up the mobile industry, is set to launch in South Africa next week.

READ MORE: Vodacom increases contract prices

With consumers finally starting to wake up, new developments will force the industry to become more competitive, transparent, and accountable.

In the next few years we may see more active consumer champions like Tariffic and the National Consumer Commission taking action, the emergence of new challenger brand MVNOs, increased competition leading to reduced rates, and new digital innovations allowing cheaper voice calls.

READ MORE: Commission investigates Vodacom, Cell C over price hikes

The exploitation of mobile customers could become a thing of the past. Give it a year or two, and the mobile industry could look very different.

*Antony Seeff is the CEO of Tariffic, a company that specialises in advising companies – and later this year also individuals – on how to save on their mobile bills.

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