New mobile price 'war' erupts in SA

The competition is so fierce that Vodacom and Cell C on Wednesday, 16 May 2012, slashed off-network and peak call tariffs to 99 cents per minute.

The arrival of cheap calls will be the latest chapter in the evolving story of mobile technology in SA. From a couple of thousand mobile phones a few years ago, SA now has 45 million active cell phones.

Announcing a new package named Freedom 99 for the prepaid market, Vodacom said calls across the networks would now be standard.

Vodacom's marketing head Enzo Scarcella said: "Customers have been looking for simplicity and for value, and Freedom 99 delivers exactly that.

"Calls to anyone, anytime, on any network in SA are now just 99 cents per minute with Freedom 99."

The country's third largest operator, Cell C pronounced a similar plan on Wednesday - in fact, just pipping Vodacom to the post as their announcement happened earlier. It says its 99 cent charge will be the cheapest in 18 years.

Cell C CEO Alan Knott-Craig said this new tariff, would in most cases make it even cheaper to call from Cell C to other networks than it was for competitors' own prepaid customers to make on-network calls.

He said that customers that signed up for the "99 Cents For Real" package would receive pure per second billing from the first second, which meant that calls to any local network at any time would cost less than two cents per second.

The current pricing war was triggered by 8ta late last year which introduced the lowest fixed-line rates and launched flat rate international calls to more than 100 countries.

Most of the leading operators responded by reducing their tariffs or by introducing similar price plans. But with Wednesday's announcements, the battlefield is wide open.

The charges by mobile operators have been under scrutiny for some time with calls of reduction echoing from various quarters, including calls by Cape Town mayor, Patricia de Lille to investigate the telecoms companies in 2010.

The country's regulator intervened with a rate cut. The Independent Communication Authority of South Africa (Icasa) announced in April that it would slash interconnection rates by 27% in July 2010 - from 89 cents per minute, to 65 cents. Icasa also announced a strategy that would see the interconnect rate cut to 50 cents in July 2011, and 40 cents in July 2012.

Local tariff levels were still among the highest in the world, according to Arthur Goldstuck, a telecoms analyst.

"This is the first step by Allan [Knott-Craig] of his vision. He made it clear that he wants to shake the market; there is no question about it that this is price war. Vodacom responded 30 minutes after the Cell C announcement," he said.

He observed that the pricing tactics would heavily affect revenue growth for some operators, but winners would be subscribers who benefited from cheaper services.

Another telecoms analyst, Chris Ngwenyama of Africa Analysis, concurred with Goldstuck. "It is a price war; Knott-Craig has announced his return in a big way."

Besides enabling millions of South Africans to easily communicate, the mobile phone is expected to spur a host of other life-improving innovations, including a money transfer service that allows people to send cash instantly across the country via text message.

Research analyst at Frost & Sullivan, Mervin Miemoukanda, acknowledged that it's an outright price war, but warned that this might have a detrimental effect on quality of service.

"We have seen this in Kenya. We may end up with networks failing to support high traffic. It's not the best way to acquire or retain customers," he observed.