After numerous failed attempts to kickstart the great cellular price war have fizzled out into mere skirmishes, there might finally be a significant shift. We might actually have a price war on our hands.
Vodacom, which has often been accused of having unnecessarily complex pricing plans, has unveiled a new pricing structure that is vastly simplified. Crucially, it even offers unlimited calling across all networks in the top-end plan.
This follows prepaid price drops recently from MTN – a drop from R1.75 to R1.20 and bills per second to all networks – and Vodacom’s Free4Sho (pay for three minutes at R1.20/min and get 57 minutes free, to all networks).
Industry watchers believe these recent changes are due to the reduction of the interconnect charges cellphone operators charge each other to connect incoming calls. The regulator Icasa has mandated the interconnect fee to drop to R0.40 from Friday, March 1.
Traditionally comparing price plans has been as easy has understanding banking fees. It allowed Cell C’s new CEO Alan Knott-Craig to outmaneuver his bigger competitors by setting the call rate across the bar at 99c.
Vodacom’s repositioning seems to stem from the experience Group CEO Shameel Joosub had running Vodafone Spain for three years, which he has previously referred to as a “time machine,” enabling him to see a year into the future of Vodacom.
“One of the big trends is the push to smartphones,” he told me in an interview last year. “We need to push smartphone penetration, that gives you an opportunity to truly democratise data.”
When he took over as CEO last year Joosub, a former CEO of Vodacom South Africa, stressed the company had to beef up its customer experience and simplify its offerings, while shifting users towards data use, as the age of boundless voice call revenue fades.
The simplified new packages – named small, medium, large, extra large, advantage, premium and VIP – offer simpler, more comprehensible choices. All of them are available with or without bundled cellphones. This financing charge ranges from a R100 to R400 per month.
Bundled voice minutes, data and SMSes are listed; and the data allocations seems generous. It’s certainly better value than has previously been offered by the largest cellular network in the country, especially the option to have a phone-less package.
The top-end, aptly-named VIP package offers unlimited voice calling and SMSing, to any network, and a sizable 1.5 gigabytes (GB) of data; as well as two extra data SIM cards that draw off the same monthly allowance.
Such unlimited calling plans already exist in South Africa, but Vodacom, with its 31-million subscribers and the largest contract customer base, is the big gorilla in the room.
Asked if this VIP package wouldn’t cannabalise big-spending clients, Joosub said: “We are cannibalising ourselves to a large degree. It’s part of our strategy to get customers to stay longer. Customers spending four to five thousand rand will now spend two grand.”
Added, Vodacom’s new managing executive of its postpaid division Enzo Scarcella, “it’s about top-end retention.” Even though these postpaid clients are dwarfed by prepaid users, they are big spenders are the lucrative top-end of the cellphone pyramid.
Joosub dismisses suggestions he is reacting to the public baiting by Knott-Craig, his one-time mentor when he was Vodacom CEO.
“It’s important to us to implement our own strategy, not react to competitors. The world is moving to data,” he said.
This is not the first unlimited calling offer in the country. Last year Cell C began offering a package for its Discovery Vitality members to make unlimited calls to each other, for an additional R25 a month.
Last year, Telkom Business Mobile and 8ta began offering an unlimited package, which was due to expire at the end of January, but has been extended, respectively, to the end of March and April.
A less opaque pricing structure by the largest operator is to be applauded, as it will force the rest of the market to follow suit.
Somewhere in the world, Lars Reichelt – the former CEO of Cell C who started the first major price skirmish by dropping data prices in 2010 – should be smiling to himself about where his early work has gotten the cellphone industry in South Africa.
This column first appeared in City Press