MTN bundle may prove too pricey

By Damaria Senne, ITWeb senior journalist

Johannesburg, 22 Jan 2007

MTN is offering a low-cost PC/Internet bundle through 300 Jet Mart stores nationwide. However, analysis of the offering shows it may be too expensive for its intended market.

The PC/Internet bundle, which includes a PC, Microsoft Office package, high-speed data modem and 25MB per month for the first six months, costs R3 999 cash.

MTN media relations manager Ntombi Mhangwani says the PC/Internet bundle is aimed at households which fall within the living standard measure (LSM) of 3-6 (earning between R1 417 and R4 207 per month).

Customers can also purchase the bundle through a Jet account or a Jet Mastercard, where a six-month contract is interest-free.

The offering was initially piloted at eight Jet Mart stores in and around Soweto in December, with the promotion ending on 31 January, she says.

Over 125 PCs were sold, indicating strong consumer interest, she adds.

Still expensive

While stakeholders agree that offering a PC/Internet bundle will encourage broadband uptake by the emerging market, there is a question of whether the offering is cost-effective enough to be affordable to its target households.

"Initiatives such as these do encourage broadband uptake," says Vodacom chief communications officer Dot Field.

World Wide Worx MD Arthur Goldstuck notes that while the offering looks like a viable option for middle-income earners, it is too expensive for the lower-range of the income group it was intended for.

"The upfront costs of the offering have not been lowered to the extent to make it compelling for low-income people to buy it."

He says he would be surprised if households below the LSM 5 category, which earn up to R2 495 per month, were able to purchase the bundle.

MTN argues that it and its partners evaluated the costs of purchasing a PC and that its offer is still cheaper than the cost of "sourcing your own PC, having someone install software and securing Internet connectivity".

"Jet Mart is a partner in the project because it has examined the spending patterns of its customers and found that, based on the credit system available to them, this offer would still be cost-effective," Mhangwani says.

However, Goldstuck says the offering also does not address ongoing costs for Internet connectivity, as only a small amount of data (25MB) is available to consumers in the first six months.

"It may well encourage broadband uptake among middle-income people, but like all the other 3G offerings in the market, the data limit and the ongoing cost of data is the offering's Achilles heel," he says.

In comparison

*Data bundle size chosen for uniform comparison.

MTN's low-cost Internet bundle initially appears to be cheaper than Vodacom's Thuthuka all-in-one offering, which includes a Mecer desktop PC, Microsoft Word, a modem and 500MB of data, and which retails at R409 per month. MTN's customer pays minimal or no interest on the initial outlay of R3 999. However, monthly data costs stand to push the price to the user much higher.

For example, 450MB data usage would cost the user R320 per month, adding up to a total cost of R11 679 over 24 months, while the Vodacom offering costs R9 816 in the 24 months of the contract. (The size of data allocation was chosen to equate with similar Vodacom offerings for easier comparison.)

Goldstuck says the impact of monthly data costs should be a key concern in any package that is aimed at the low-end of the market.

"Any offering that requires one to pay the current rates of data is too expensive, regardless of how you package it," he says.

According to Sentech's Web site, the MyWireless Flexi 500 PC bundle costs R599 per month, for 24 months, while the lowest data offering, MyWireless Flexi 200 PC bundle, costs R499 per month.

Telkom does not have a product that easily compares with the MTN and Vodacom offerings. It has a PC/DSL which includes a 2GB bundle and costs R729.37 per month. The fixed-line operator's cheapest dial-up PC/Internet offering costs R219.37 per month over 36 months.

iBurst says it does not have a regular PC/Internet bundle offering and occasionally makes such products available on promotion.