Over the past year, Cell C and 8ta have disrupted the SA mobile market by introducing aggressively priced data and voice offerings. These come against a backdrop of an implicit duopoly in the local industry that is protected by a strong ‘network effect’. Initially supported by high termination rates, high voice prices are now justified through marketing and advertising spend at least three times that of Cell C. This has created information asymmetry in the minds of the consumer who infer a premium to the value of the very products whose pricing he/she is failing to decode. By branding a commodity (a voice minute), the ‘smoke and mirrors’ has helped counter the need to immediately match the more transparent voice pricing introduced by Cell C. As a result, a full-blown price war has not yet developed within the mobile voice segment.
Mobile data however is a different story. Larger operators are already matching Cell C and 8ta’s aggressive and transparent deals. Absence of the “network effect” in the data segment makes it easier for Cell C and 8ta to compete directly on the basis of price. As the World Wide Web is not the preserve of any one player, and cannot be defended through interconnect fees, it is highly susceptible to price. Thus, prices have dropped as much a 60% from the standard rate over the past few months in some cases.
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