Vodacom and MTN plan to continue price increases despite revenue increases.
According to their latest financial results, pan-African mobile network operators Vodacom and MTN recorded service revenue increases of 17.2% and 15.6% respectively. Despite the growth in revenues, both MNOs have announced that they are planning on implementing price hikes across their various markets. Vodacom’s mobile contract customer revenue increased by 2.8% to R22.6 billion, benefitting from contract price increases of between 3% – 5% implemented in the first quarter of the financial year.
Speaking at an annual results investor and analysts call this week, Vodacom Group CEO Shameel Joosub stated that the telco plans to continue with price increases, especially for post-paid customers, permanently.
“The modus operandi that we’ve deployed now is to increase prices, which we think we want to make a more permanent feature of our strategy going forward, but at the same time to give more value. So, what we’re doing is we’re increasing the allocation of data that comes with it. An example would be if you have had a 6% to 7% increase, you have got between 15% to 20% increase in the bundle that we are now allocating to the customer,” said Joosub.
For prepaid consumers, Vodacom stated that it will be trying to do more price optimisation instead of straight-up increases. This will be done by effectively allocating more data on the monthly packages and slightly lifting the price at the bottom to be able to do it.
“We’re also putting a large focus on making sure that customers are getting the maximum out of it. Through our CVM (customer value management) platforms, if they’re properly engaged, it increases their active days. We’ve built a new measure into our AI platforms that doesn’t just look at the uplift, but also pushes more deliberate active day management to try and get more days out to the customer,” added Joosub.
Unlike Vodacom whose pricing strategy seems to be underpinned by more value addition for consumers, MTN’s strategy, according to CEO Ralph Mupita, is meant to mitigate macroeconomic pressures on the business.
“The postpaid price increases, effective from April 2023, should help to drive improved top-line growth in the business and mitigate inflationary impacts on the MTN SA business. This tariff increase will help to mitigate the decline in voice and improve data performance in the remainder of the year,” Mupita said.
In March, MTN also announced that it was passing the costs of dealing with loadshedding to consumers, with MTN South Africa CEO Charles Molapisi stating that “if we don’t pass some of these costs [to customers] it will become difficult for the sustainability of the business.”
To cushion the impact of the price increases on consumers, MTN added that it will be introducing different bundles to cater for the change in consumption. Additionally, Molapisi said that the telco “will be practical on how [it increases] prices so that [it doesn’t] squeeze the lower end of the market”.
With macroeconomic pressures not showing any signs of simmering down anytime soon, it seems like the telcos will also keep passing the cost of doing business to consumers, especially the postpaid ones.
“Within this environment of elevated inflation, implementing selective price increases across the portfolio remains a critical priority to ensure that operations generate sufficient cash flows to fund future capital expenditure needed for building world-class networks. We will continue to have the necessary engagements with the regulatory authorities on such needed increases,” MTN added.
