Johannesburg, 15 Sep 2005
Vodacom today issued a response to the retraction from the Independent Communications Authority of South Africa (ICASA) concerning the widely quoted discussion document on mobile prices published in the Government Gazette of 28 July 2005.
In the retraction, published on ICASA`s Web site, the authority, "regrets the unfortunate errors and any inconvenience caused to operators and interested parties" and refers specifically to comparative tables for countries like Hungary, the Czech Republic, Switzerland and Spain.
Says Alan Knott-Craig, Group CEO, Vodacom: "We welcome ICASA`s retraction of this document. The Government Gazette has been widely quoted by the media and has fuelled large-scale negative public debate about cellular tariffs in SA and how they compare to tariffs in the rest of the world.
"ICASA, however, has in their retraction only corrected the incorrect subscription fees and did not address the serious inaccuracies with regard to actual call charges, or the comparison of incomparable countries and tariff types. The authority seems to justify the inaccuracies by stating that `the study is anecdotal and merely used to reflect trends`. Information that is used to ascertain `salient trends` should ideally be based on factually correct information, let alone comparable tariff types and countries.
"Vodacom has gone to great lengths to address these issues and to present the facts to the public at large, as this kind of confusion only damages the public image of the telecommunications industry as a whole and the regulator alike."
Commenting on the issue in general, Knott-Craig notes the following facts:
Fact 1: The South African cellular tariffs are competitive when compared with world averages. Broadly speaking, if you compare SA with developing markets, we are average in terms of our pricing and the same goes for the developed world. The fact of the matter is that many of the cellular tariffs today are lower than they were in 1994.
Comparing the prepaid user tariffs, Vodacom`s 4U prepaid tariff option, ranks 13th lowest out of 61 operators in 30 OECD countries which indicates that Vodacom offers one of the top 20 most affordable prepaid tariff options available.
Vodacom ranks 33rd lowest of 61 operators in 30 OECD countries for its high user postpaid tariff. This user profile is based on Vodacom`s Talk 500 tariff plan and reflects that for the average high user subscriber, Vodacom tariffs are competitive relative to other markets.
The profit margins in the South African cellular industry, such as earnings before interest, tax, depreciation and amortisation (EBITDA) margin, are also on par with most countries in the world.
Fact 2: The South African cellular industry and our networks are among the best in the world. This is acknowledged as such internationally, and was confirmed by a study commissioned by the South African Government in December 2003 by the Yankee Group. South Africa pioneered the prepaid industry as well as community telephones to provide universal access at extremely affordable tariffs. It has an industry which has produced 26 million customers in just over 10 years and has made giant strides in bridging the digital divide and democratising telecommunications.
In terms of actual charges paid by mobile users, competition has prompted the introduction of a wide range of innovative tariff plans to capture market share, and grow the low use / low income market segment as penetration reaches higher levels. The availability of a wide variety of services which are free as well as tariff plans which allow a user to choose a tariff plan according to his/her unique usage profile means that a single focus on a few specific individual tariffs alone provides an incomplete and misleading picture. It is therefore of crucial importance to look at packages rather than individual tariff rates in isolation.
Fact 3: Competition, not regulation is bringing down prices. The regulator has done its job to date, of allowing `free market` forces to flourish and in so doing, we have seen tariffs steadily decreasing over the last year: Vodacom reductions have included a 10% reduction in prepaid; a 60% reduction in SMS and a substantial 90% reduction in rates for data."
In addition, Vodacom recently announced a new `Happy Hours` tariff of R1.49 for all peak calls (contract and pre-paid) between 5pm and 8pm, Monday to Friday for Vodacom-to-Vodacom calls, representing a discount of up to 54% for prepaid users. Added to this, a new rate of R2.99 per minute for all prepaid calls made during peak times from 7am to 8pm, represents a reduction of up to 17% which will benefit over 13 million Vodacom customers.
Fact 4: Mobile penetration rate in SA. Is not the biggest measure of pricing, the penetration of a product or service into the market? South Africa has a mobile penetration rate of over 50% on a population basis. South Africa`s penetration is 60% higher than the level that would be expected based on its income per capita. Penetration in South Africa has reached levels only a little short of those in European accession states, where the median per capita income is approximately twice of that in South Africa.
Fact 5: Vodacom`s cumulative capital expenditure reached more than R20 billion by end March 2005, to provide one of the best networks in the world. Shareholders, including Vodafone, took the risk of investing in a new technology, even when banks, 10 years ago were not interested. These same shareholders have only enjoyed significant dividends over the last two years.
In conclusion, Knott-Craig said: "The South African cellular industry is a success story, from the point of view of technology, service and delivery. Continued competition is welcomed to ensure an active and vibrant industry, where the consumer continues to benefit."
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