For many years we have bemoaned South Africa’s exorbitantly high data prices. While it is still more expensive here than with most of our neighbours, the Competition Commission has finally stepped in and forced the telecoms companies’ hands. Vodacom is already seeing dividends of price drops, as it reports 66% growth in data usage in the year ending 31 March 2020.
“We ended the year with data customers up 9.7% to 21.9 million and smartphone users up 11.8%, of which 73.3% are 4G customers,” Vodacom said. “The number of 4G devices on our network increased 34.5% to 12.9 million, while the average usage per smart device increased 56% to 1.5GB.”
It said that the price reduction has led to more “elasticity” in demand from customers. This does beg the question to why they didn’t drop prices years ago. The demand is obviously there and they would have made back any losses in revenue from the price reductions from increased purchases from existing customers, while unlocking additional value from new customers no longer priced out of the market.
Of course, towards the end of their financial year there was also a big increase in demand due to the coronavirus and work-from-home measures.
“Excluding the one-off benefit of R389-million from the change in revenue deferral methodology in the prior year and the current-year change in mobile termination rates (MTRs), underlying growth for the year was 3.3%. The fourth quarter revenue grew by 3.9% (5.1% adjusting for MTRs and prior year deferral) maintaining the commercial momentum from the previous quarter.”
To Vodacom’s delight, there has been a 5.6% reduction in prepaid customers. “This has resulted in the one-month active customers being stable, evidencing this improvement. Usage elasticity on data has helped offset the out-of-bundle revenue reduction, resulting in average revenue per user (Arpu) returning to growth in the fourth quarter.”
As other telecoms companies follow suit in dropping prices, like MTN did last month, the South African consumer stands to benefit from increased competition and innovation. Hopefully this trend will sustain itself naturally and we don’t need the authorities to step in again.