SA mobile data prices likely to increase – Africa Analysis

South Africa has seen major price reductions in mobile data rates per GB over the past two decades, but ICT market research and analysis firm Africa Analysis warns that consumers should prepare for price increases from local operators going forward.

Ofentse Dazela, director of pricing research at Africa Analysis, provided Connecting Africa with detailed data on the pricing changes for capped 30-day prepaid mobile data bundles that were offered from 2005 through to 2023.

The analysis draws on the company's extensive pricing database and is based on the median data rates per GB.

"Since 2005, we have tracked seven prepaid data bundles in our pricing database, namely the 100MB, 250MB, 500MB, 1GB, 2GB, 5GB and 10GB. By December 2023, the overall median price per GB of these bundles had declined by 88%," Dazela explained.

However, Africa Analysis believes there are factors at play that will see prices forced up again in the short-to-medium term due to increasing operational and capital costs for operators linked to SA's unstable power grid, inflation and currency weakness.

Pricing cycle reductions since 2005

Starting off with the positives, Dazela said there have been three significant cycles of price reductions over the past 18 years.

During the first cycle, between 2005 and 2011, the median rate per 1 GB declined 61.9% from R880 (US$46.28) to R335 ($17.62). This period saw 3G launch in 2005 and roll out across the country.

"The second cycle saw the launch of LTE in 2012 that led to the introduction of various LTE packages between 2012 and 2019. This uptake spurred price-based competition paving the way for more price cuts in this seven-year period," Dazela said.

The median rate declined by 29.5%, from R244 ($12.83) per GB to R172 ($9.05).

The third and current cycle started in 2020, and resulted in further prepaid data rate cuts through the end of December 2023, partly because of direct intervention by the Competition Commission which forced some local operators to drop prices in early 2020.

The median rate per GB fell 45.4% from R129 ($6.78) to just under R70 ($3.68) by the end of 2023, Africa Analysis found.

Dazela said the 30-day prepaid data bundle prices remained relatively flat in the past two years, with the median rate declining by only 5.4%, from R74 ($3.89) per GB to R70 ($3.68) per GB.

Overall, the median rate per GB of the 30-day prepaid bundles saw a compound annual decline of 13% per annum between 2005 and 2023.

The focus of the analysis was based on the leading mobile operators in South Africa – Cell C, MTN, Telkom and Vodacom – that offer monthly prepaid capped data bundles.

SA's data pricing future

Over the years, it's been clear operators have implemented significant price cuts. But Dazela believes the question on everyone's mind is whether there is still room for further cuts in the prepaid data segment.

The release of additional spectrum in SA created a market expectation that this would lead to accelerated price decreases of mobile data.

However, Africa Analysis believes several factors have acted against this expectation and continue to do so.

These include the persistently weak economic climate characterized by subdued consumer spend; inflationary pressures; the weak South African rand to US dollar exchange rate; and unabating episodes of load shedding.

SA's data prices declined by 61.9% between 2005 and 2011; by 29.5% between 2012 and 2019; and by 45.4% between 2020 and 2023 (median rate per GB). (Source: Freepik)

He said that, in a bid to protect revenues, operators will likely continue to roll out expensive additional measures to mitigate ongoing power outages, like buying more back-up generators for mobile towers.

Load shedding has been happening intermittently in SA since November 2007. The term refers to the deliberate shutdown of electric power by state-owned power utility Eskom in parts of the power distribution system when capacity is strained.

"SA has experienced the most extensive episodes of load shedding in the last two years (2022/23) and it most certainly appears that load shedding will still be with us for some time going forward," Dazela explained.

Additionally, vandalism and battery theft at telecom network sites – which often spike during blackouts – resulted in further unplanned expenses for operators.

Earlier this week, MTN South Africa said it was joining forces with Community Police Forums (CPF) to tackle network infrastructure theft and vandalism in the country.

In March 2023, MTN said it would invest $84.3 million in South Africa to help mitigate ongoing power blackouts in the country, and it plans to get its basestations completely off grid in the future.

Since 2020, Vodacom South Africa has spent over R4 billion ($210 million) on backup power solutions such as batteries and generators and a further R300 million ($15.8 million) in the 2023 financial year on additional running costs in the form of diesel, security and maintenance.

"All these factors strongly suggest that prepaid data prices could rise in the immediate future, thus bucking the past 18-year trend of price declines," Dazela explained.

He said SA is likely entering a fourth cycle that is characterized by price increases in the short-to-medium term.

"Consumers should prepare for price increases from the operators," he concluded.

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— Paula Gilbert, Editor, Connecting Africa