Get ready for mobile data price increases
• Consultancy Africa Analysis worries about higher mobile-operator costs
Consumers should brace themselves for data price increases despite findings that the overall median price per gigabyte of the most popular mobile data bundles fell almost 90% since 2005.
This is according to information communication technology research and consulting company Africa Analysis, which says higher costs for mobile operators are a worrying trend.
The firm has tracked seven prepaid data bundles in its pricing database since 2005, specifically the 100MB, 250MB, 500MB, 1GB, 2GB, 5GB and 10GB. By December 2023, the overall median price per gigabyte of these bundles had fallen 88%, the firm says.
Ofentse Dazela, director of pricing research at Africa Analysis, said mobile operators are under huge financial strain, which could soon be pinned on consumers.
“Over the years, operators have implemented significant price cuts, but the question on everyone’s mind is whether there is still room for further price cuts in the prepaid data segment,” said Dazela.
“The R14bn release of additional radio frequency spectrum in March 2022 created an expectation that this would lead to accelerated price decreases of mobile data.
“For years mobile operators had argued that not having enough spectrum had forced them to take on extra costs in building out their networks.
Spectrum would allow for more efficient connections and help to reduce capital expenditure.”
Despite this promise, mobile operators now face a new set of problems which continue to push up operating costs.
One of the challenges facing the sector is the persistent weak economic environment characterised by subdued consumer spending.
Rising living costs and the battle to contain inflation, the rand-dollar exchange rate which can affect the cost of network equipment or foreign debt, and load-shedding also undermined efforts to reduce costs of communication.
“Operators have and will continue to grapple with increasing operational and capital costs,” Dazela said.
In 2023, MTN earmarked R1.5bn to keep its network up during load-shedding, as well as to protect network equipment and backup power from thieves. Competitor Vodacom spent more than R4bn on backup equipment since 2020 and R300m on extra running costs in 2023.
Last week, Telkom reported that more than 3,000 suspects were arrested in cases involving vandalism and damage of its vast infrastructure. In recent years, the problem of vandalism has been worsened by rolling blackouts.
Studies have shown that bouts of load-shedding have a direct correlation with the spike in vandalism and battery or generator theft at network sites.
“All these factors strongly suggest that prepaid data prices could rise in the immediate future, thus bucking the past 18year trend of price declines. We are, therefore, likely entering a fourth and new cycle that is characterised by price increases in the short-to-medium term,” Dazela said. “Consumers should prepare for price increases from the operators.”
The firm has observed three cycles of price reductions over the past 18 years.
From 2005 to 2011 the median rate per gigabyte fell from R880 to R335. This was the biggest reduction at the time, of 61.9%. The period saw 3G launched in 2005 and rolled out across the country.
The second cycle came with the launch of LTE in 2012. This led to the introduction of LTE packages from 2012 to 2019. This uptake spurred price-based competition, paving the way for more price cuts in this sevenyear period, said Dazela.
The median rate declined by 29.5%, from R244 per gigabyte to R172.
The third and current cycle, starting in 2020, has seen further prepaid data rates cuts through December 2023, partly because of direct intervention by the Competition Commission.
The median rate per gigabyte fell from R129 to just less than R70 by the end of 2023. That amounted to a reduction of 45.4% during this period.