Unpacking Vodacom’s new tariffs
Cell C’s aggressive price cuts are paying off for customers of other networks: the bigger operators appear to be feeling the heat, although their size precludes them from matching Cell C head on. By Craig Wilson.
Whether it’s in call rates, flexible contract terms or free airtime, Knott-Craig is determined to hit his competitors where it hurts in an effort to grow Cell C’s market share. And, as Vodacom’s founding CEO, he knows exactly where to poke.
So far, it’s Vodacom that is responding most aggressively to Cell C’s moves. Perhaps it’s aware that, as South Africa’s largest operator by subscriber numbers, it has the most to lose.
At the weekend, it reduced its prepaid call rate to all networks to R1,20/minute. Perhaps more significantly, customers now get 57 minutes of free airtime for calls to other Vodacom subscribers. They only have to make a three-minute call costing R3,60 to enjoy the benefit.
Vodacom’s R1,20/minute isn’t nearly as aggressive as the 99c/minute rate Cell C introduced last year — especially if one considers that the Vodacom tariff is billed per minute and Cell C’s per second — but it’s a move in the right direction.
It’s capitalising on the fact that it has more subscribers than any other South African operator and, as a result, its on-network rates are more valuable and attractive to consumers than Cell C’s. Cell C’s market share is about 13% against Vodacom’s 50%. Statistically, consumers will on average be calling a Vodacom number half the time.
Vodacom is painting on-net calls of extended duration as a big perk. But how many people make calls of the length that would allow them to benefit significantly from the new pricing? You can be sure the operator’s finance geeks have crunched the numbers carefully.
Of course, there’s also the issue of having to pay attention to which network you’re calling. Few people memorise phone numbers any more, and even if they did, there’s no guarantee that the 082 prefix denotes a Vodacom number thanks to number portability. On-net specials are restrictive and require effort on the part of consumers.
What’s most telling about Vodacom’s latest move is that it must be feeling pain from Cell C. It seems unlikely it would have cut prices preemptively. It must be seeing churn away from its network. It admitted in its recent quarterly financial update that it is feeling greater competitive pressure. It blamed this, together with other factors, for a muted performance in the three months ended 31 December 2012.
Meanwhile, MTN, South Africa’s second largest mobile operator, is yet to make a big move like Vodacom, although it did reintroduce its “Mahala Thursdays” campaign last week whereby prepaid and top-up users who recharge with R10 or more on a Thursday receive an additional 50% of the value loaded on their account. Perhaps MTN’s business intelligence systems suggest it’s not necessary yet for it to train its turrets on Cell C’s head office.
Cell C’s trump card is that it can trumpet the virtues of transparency. For the incumbents, subterfuge isn’t necessarily desirable, but it’s difficult to avoid. Vodacom can’t afford to match Cell C’s offers head on — its shareholders would surely revolt! Instead, it has to rely on carefully orchestrated gestures that look approximately the part.
But at least Vodacom is responding. And that’s great news for South African consumers. — (c) 2013 NewsCentral Media