Vodacom, MTN Get Handed Price Warning: Data Really Must Fall
(Bloomberg) -- Vodacom Group Ltd. and MTN Group Ltd. shares fell after one of South Africa’s competition regulators ruled that the country’s two largest mobile-phone companies overcharge customers for data -- particularly those on lower incomes.
The two carriers bill more in their home market than in other countries in which they operate, the Competition Commission said in a provisional report on an inquiry that began in August 2017. Customers hardest hit are those using smaller prepaid bundles, who tend to be less well off, the regulator said.
“Lower income consumers may be exploited to a far greater degree relative to wealthier consumers,” said Commissioner Tembinkosi Bonakele. The carriers must commit to reduce the price of sub-1GB packages to “within an objectively justifiable and socially defensible range” of current levels, he said.
Vodacom, majority owned by U.K.-based Vodafone Group Plc, and MTN had a combined 75 million customers in South Africa at the end of 2018, or about three-quarters of the current market, which includes those with more than one mobile-phone subscription. Smaller carriers have long appealed to regulators to curb the dominance of the top two carriers, while the high cost of data has been the subject of street and social media protests using the hashtag #DataMustFall.
Vodacom dropped 5.1 percent to 114.88 rand at the close in Johannesburg, the most in three months, while MTN fell by 2.4 percent.
“‘Vodacom can confirm that, as part of its ongoing pricing transformation strategy to address the cost-to-communicate in South Africa, we have reduced the effective cost of data by 34 percent in the past calendar year alone,” spokesman Byron Kennedy said in an emailed response to questions.
The Competition Commission measured South African data prices against other countries in Africa and around the world and found they compare poorly, the regulator said. One reason is the government’s repeated delays in providing new mobile spectrum, which would increase access and bring down costs, it said. However, any upcoming auction should be based on a requirement for providers to cut fees and lay on services including free WiFi in public spaces.
“MTN is encouraged to see the Competition Commission recognizing the importance of spectrum allocation as a critical lever to facilitate the growth and health of the mobile sector,” said the Johannesburg-based company, Africa’s biggest by subscriber numbers. “Much has changed in the mobile-data pricing sector in the past 18 months. The Commission’s studies appear to have largely relied on data from 2017 which will not consider changes in 2018 and this year.”
The wireless carriers’ views on the findings should be submitted by June 14, while a final report will be published later this year.
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