The great cellular price war

Consumers are bound to benefit from all the competitive offerings from mobile network providers. Picture: Denvor de Wee

Vodacom’s new pricing structure sees consumers coming out on top

Numerous failed attempts to kick-start the great cellular price war have fizzled out into mere skirmishes, but there might finally be a significant shift. South African cellphone users might actually have a price war on their hands.

Vodacom, which has often been accused of having unnecessarily complex pricing plans, has unveiled a new pricing structure that is vastly simplified.
Crucially, it even offers unlimited calling across all networks in the top-end plan.

This follows prepaid price drops recently from MTN – a drop from R1.75 to R1.20 per minute for voice calls and bills per second to all networks – and Vodacom’s Free4Sho (pay for three minutes at R1.20 per minute and get 57 minutes free to all networks).

Industry watchers believe these recent changes are because of the reduction of the interconnect charges cellphone operators charge each other to connect incoming calls.

The regulator, the Independent Communications Authority of SA, mandated the interconnect fee to drop from 56c to 40c on Friday this week.
Traditionally, comparing price plans has been as easy as understanding banking fees.

It allowed Cell C’s chief executive, Alan Knott-Craig, to outmanoeuvre his bigger competitors by setting the call rate across the bar at 99c.

Vodacom’s repositioning seems to stem from the experience group chief executive Shameel Joosub had at the time he ran Vodafone Spain for three years, which he has previously referred to as a “time machine”, enabling him to see a year into the future of Vodacom.

“One of the big trends is the push to smartphones,” Joosub told me in an interview last year.

“We need to push smartphone penetration that gives you an opportunity to truly democratise data.”

When he took over as group chief executive last year, Joosub, a former Vodacom South Africa chief executive, emphasised the operator had to beef up its customer experience and simplify its offerings, while shifting users towards data use as the age of boundless voice call revenue fades.

The simplified new packages – named small, medium, large, extra large, advantage, premium and VIP – offer simpler and more comprehensible choices.

All of them are available with or without bundled cellphones. This financing charge ranges from R100 to R400 a month.

Bundled voice minutes, data and SMSes are listed, and the data allocations seem generous. It’s certainly better value than has previously been offered by the largest cellular network in the nation, especially the option to have a phoneless package.

The top-end, aptly named VIP package offers unlimited voice calling and SMSing to any network and a sizable 1.5 gigabytes of data as well as two extra data SIM cards that draw off the same monthly allowance.

Such unlimited calling plans already exist in South Africa, but Vodacom, with its 31 million subscribers and the largest contract customer base, is the big elephant in the room.

Asked if this VIP package wouldn’t cannibalise big-spending clients, Joosub said: “We are cannibalising ourselves to a large degree. It’s part of our strategy to get customers to stay longer.

“Customers spending four to five thousand rand will now spend two grand.”

Enzo Scarcella, Vodacom’s new managing executive of its contract customer division, added: “It’s about top-end retention.”

Even though these postpaid clients are dwarfed by prepaid users, they are big spenders and are the lucrative top end of the cellphone pyramid.

Joosub dismisses suggestions he is reacting to the public baiting by Knott-Craig, his one-time mentor when he was Vodacom chief executive.

He said: “It’s important for us to implement our own strategy and not react to competitors. The world is moving to data.”

This is not the first unlimited calling offer in the nation.

Last year, Cell C began offering a package for its Discovery Vitality members to make unlimited calls to each other for an additional R25 a month.

Last year, Telkom Business Mobile and 8ta began offering an unlimited package, which was due to expire at the end of January, but has been extended to the end of March and April, respectively.

A less opaque pricing structure by the largest operator is to be applauded as it will force the rest of the market to follow suit.

Somewhere in the world, Lars Reichelt, the former chief executive of Cell C who started the first major price skirmish by dropping data prices in 2010, should be smiling to himself about where his early work has taken our mobile industry.

MTN enters the data fray
The same day Vodacom took the wraps off its new simplified contracts, MTN announced steep cuts of up to 40% in its data pricing.

This follows a price cut of the same percentage by Telkom for fixed-line ADSL broadband prices. It’s safe to say a price war is afoot, although it remains as hard as ever to compare cellular networks against each other.

MTN has dropped its 500 megabytes contract add-on to R49 a month and lopped R20 off all the other bundle sizes (1 gigabyte for R79; 2GB
for R99).

Prepaid data starts at R49 for 75MB, while R70 was slashed to bring 300MB down to R79 and 500MB to R119. R140 was cut off 1GB to R149.

» Shapshak is publishing editor of Stuff magazine