It is an obvious equation: the lower the cost of using an essential service, the more we will use it, and chances are we will spend more. For South Africa’s mobile operators, it’s not so obvious. They have to be dragged, kicking and screaming, into the world of more affordable data.
The timing could not have been better for the Competition Commission to start the dragging process, when it instructed the operators in December to cut their data charges or have it done for them. This meant that, by the time the country went into lockdown due to the Covid-19 crisis, the mobile networks had already committed to lowering costs.
The bottom line is that the cost of the average data bundle has been cut by a third or more as we mark two months in lockdown. With social distancing likely to keep many of us at home, from work or school, for the foreseeable future, those data bundles have become a lifeline.
Even before lockdown began, use of data was rocketing up in South Africa. The latest annual results from Vodacom, released on Monday, showed that data traffic for the year to the end of March 2020 was up 66% over the previous year, “with continued acceleration during the fourth quarter”.
That single word, “acceleration”, sums up the impact of both price drops and social distancing on the world of data. And it’s a classic win-win situation: better prices for consumers, more business for providers.
According to Shameel Joosub, Vodacom Group CEO, the company Vodacom ended the financial year with 9.7% more data customers, now standing at 21.9-million, and the number of 4G devices on the network up by more than a third, to 12.9 million.
The most significant number, however, was this: the average usage per smart device increased by 56%, to 1.5GB. In other words, in the previous financial year, the average usage was below 1GB per month per user and was now above 1.5GB. That suggests the coming year will see average use shoot above 2GB per user of a 4G device.
“The increase in the drivers of data growth gives us confidence that we will continue to see elasticity to compensate for the pricing transformation initiatives agreed with the Competition Commission and implemented from 1 April 2020,” said Joosub.
MTN reported similar optimism in its annual results for the 2019 financial year, released in March.
“Following data price reductions in South Africa and Nigeria in 2019, we expect price elasticity to improve data revenue growth in 2020, supported by expanded 4G coverage in Nigeria and across the group,” said MTN Group CEO Rob Shuter. He revealed that overall data prices in South Africa had been reduced by 16% – and revenue had increased by 5.2%.
Both companies prefer the word “price elasticity” to “more affordable”, but that’s how it translates: the more affordable the data, the more it gets used.
It is for this reason, too, that both companies have committed to massive network expansion. Vodacom invested R9.9-billion in capital expenditure on infrastructure last year and is expected to invest a similar amount this year. MTN reported 7.6-billion in capital expenditure on its network for last year. For this year, it expects to invest another R8.6-billion.
Both companies are also investing in fibre services, for both homes and offices. Vodacom more than doubled its total number of homes and businesses connected, to 61,427, with its own fibre passing 104,000 homes and businesses. MTN also expanded its own fibre service, Supersonic, winning accolades for its performance.
This broadband expansion is not limited to the mobile operators. Vuma, South Africa’s leading fibre infrastructure provider, is expanding its network well beyond the major urban centres that have been its stronghold since 2015. Even during lockdown, it is expanding its infrastructure, with Polokwane the latest target city.
It joins Vox Telecom’s Frogfoot there, with the latter having embraced a strategy of serving secondary towns and cities. It is already laying down fibre in places like Bloemfontein, East London, Ermelo, Middelburg, Pietermaritzburg, Richards Bay and Witbank. Both Vox and Vuma have rolled out in Soweto, while Vuma is also servicing the Cape Flats with low-cost, prepaid fibre.
“Fibre gives South African families who are staying indoors access to the world outside of their walls,” says Simon Butler, chief operating officer of Vuma. “More people are logging in to YouTube and streaming sites to watch the latest news around the current pandemic. Working parents, entrepreneurs and students learning from home are turning to digital platforms and online resources to ensure they stay on top of their individual responsibilities.”
Amid fears that the higher volumes of people now streaming, downloading, e-learning and working from home may cause slower internet speeds across the board, Butler says that fibre is perfectly geared to provide for this increase.
“While internet service providers in South Africa have reported an increase in demand in terms of the number internet users on the networks, home fibre connections are more than capable of ensuring a continuance of high data speeds for this increase. Our network supports speeds of up to one gigabyte per second, and this will see us well into the next couple of years in terms of increase in demand of bandwidth.”
Vuma, along with Telkom and Vox Telekom’s Frogfoot network, has announced that they will upgrade all fibre users to the next highest connectivity speed, at no additional cost. This means customers on a 10Mbps plan now get 20Mbps line speed, while those on 100Mbps move to 200Mbps.
Says Butler: “The driving force of Vuma as a business has always been centred by our mantra ‘if we can, we must’ attitude.”
Arthur Goldstuck is founder of World Wide Worx and editor-in-chief of Gadget.co.za. Follow him on Twitter and Instagram on @art2gee