MTN Tweaking Tariffs, Denies Price War

Tuesday, September 6, 2005

Vodacom cut pre-paid tariffs twice in a week, arguing the new rates would attract more customers from the lower end of the market. The first cut prompted a drop in the share price of MTN and Vodacom’s majority shareholder Telkom.

South Africa’s second biggest cell phone operator MTN is planning a tariff overhaul, but said on Friday it would not engage in a price war with rival Vodacom, which has cut rates twice in a week.

Maanda Manyatshe, chief executive of MTN’s SA business, told Reuters a tariff review would be completed in about two months which would aim to attract more customers by providing better value bundles, including free banking or SMSs, rather than simply cutting prices.

“We will resist going into a price war,” he said in a telephone interview. “It does not add value for our shareholders or customers.”

Cell phone companies in South Africa are under pressure over what a consumer group called “obscene” tariffs. The communications regulator is investigating mobile tariffs and has said it may either cap prices or licence more operators.

Vodacom cut pre-paid tariffs twice in a week, arguing the new rates would attract more customers from the lower end of the market. The first cut prompted a drop in the share price of MTN and Vodacom’s majority shareholder Telkom.

It said on Thursday all pre-paid calls would cost a maximum of R2.99 per minute on a per-second basis from 7 am to 8 pm, a cut of up to 17%.

But MTN said Vodacom, which has more than 50% of the market, was simply responding to its own cheaper rates launched recently. Given the plethora of different packages it is difficult to compare tariffs, but MTN said comparable pre-paid peak time tariffs ranged from R2.30-R3.60.

Manyatshe insisted the tariff review due in the next two months was not a reaction to Vodacom’s price cuts and would focus on offering bundles rather than cutting tariffs. MTN would also seek to avoid raising rates on high-contracts as far as possible — a tactic employed on some packages by Vodacom.

“We really believe we can offer value bundles without getting into a price war,” said Manyatshe. “It is not just about cost.”

Source: Business Day (link opens in a new window)