VODACOM, MTN CALLED OUT ON DATA
Low-income consumers are paying more
THE COUNTRY’S two biggest telecoms companies, MTN and Vodacom, tumbled on the JSE yesterday after the Competition Commission’s Data Market Inquiry accused them of excessive pricing and being anti-poor.
MTN stumbled 5.4 percent to R86.46 and Vodacom fell 5 percent to R115.07 after the anti-graft agency gave them until February to lower their data costs or face prosecution.
The commission said its inquiry found that the data prices of both companies were higher in South Africa compared with their operations in other territories on the continent, placing cash-strapped consumers on the back foot.
The commission’s chief economist, James Hodge, dismissed MTN and Vodacom’s assertion that data prices were higher in this country because South Africa lacked spectrum and that the blame should be laid at the door of the government.
Hodge said the Competition Commission looked at overall profitability, which accounts for any costs, including South Africa’s lack of spectrum, adding there was no cost explanation for the high prices.
He said the annual financial statements for the mobile operators, including data and voice, had consistently delivered price mark-ups of 20 percent to 25 percent, on average, over the past six years.
“This level of mark-ups is sufficiently high to establish a prima facie case of excessive pricing by Vodacom. A similar exercise for MTN reveals lower, albeit positive, mark-ups,” said Hodge, adding that the high levels of profitability and mark-ups were also indicators of market power by both operators.
The commission’s report is the latest blow for the mobile operating giants after the Independent Communications Authority of SA (Icasa) announced changes to End-User and Subscriber Service Charter Regulations in April, requiring that the networks provide an option for customers to roll over unused data.
Hodge said the report found antipoor pricing practices by MTN and
Vodacom, where the poorer consumers who purchase less data paid inexplicably higher prices compared with their wealthier counterparts, on a like-forlike basis.
“Poorer consumers are faced with little option but to resort to purchasing short-validity bundles in pursuit of lower prices, but this is no answer, as it does not provide them with continual data access at affordable prices,” Hodge said.
Competition commissioner Tembinkosi Bonakele said MTN and Vodacom needed to reduce their tariffs by a further 30 percent to 50 percent even after recent cuts.
Bonakele said the changes should be substantial and immediate.
“We will not continue debating,” Bonakele said. “The industry must come on board, or else we will do what we need to do.”
MTN insisted that the government and regulators had failed to release the spectrum that the mobile industry needed for more than a decade.
The group said the spectrum would have helped to bring down costs.
“To simply lay the blame for data costs at the foot of the operators is wrong. MTN in South Africa has had to compensate for the lack of spectrum by spending over R50 billion in the last five years to build a world-class network for all South Africans, covering over 95 percent of the population with 4G coverage, without any 4G spectrum having been allocated,” said MTN.
Vodacom spokesperson Kennedy Byron said the group was reviewing Icasa’s and the commission’s documents in greater detail.
“It is immediately evident that there is a significant difference in opinion between the Competition Commission and Icasa on several issues that are critical to data prices in South Africa,” said Byron.
Hodge, however, said the operators were responsible for price discrimination, with poor consumers often settling for using short-validity hourly, daily and weekly bundles, which were inferior, because they did not have alternatives.
“Heavy users usually often have fibre at home or WiFi at work. They can have access to credit and get postpaid bundles” said Hodge.