Cellular services in South Africa began to grow rapidly after the Apartheid period when the government awarded contracts to 2 telecommunications groups. Mobile Telephone Network (MTN) and Telkom were the two companies fortunate enough to get the contracts. Telkom partnered with UK-based company, Vodafone and a local investor, Rembrandt Group to form Vodacom. Before this, cell phones and cell service charges were unbearably expensive. It led to the introduction of pre-paid cards but didn’t solve the problem of the cost for the phones.
The exclusive agreement was for the telecommunications infrastructure in the country for 5 years. After the 5 year period, the exclusivity clause would no longer be valid and other cellular companies would be allowed to operate and offer their services. This agreement was contested by many South Africans as being protective over the then government-run company, Telkom. In fact at the time, there were over 80 applications for telecommunication licenses that handed in tenders but were turned down for one or another reason.
Today, there are about 5 cellular companies in the South Africa servicing more than 30 million cell phone users. These 5 companies are 8-ta which is managed and operated by Telkom, Vodacom, Cellstar Cellular Networks or Cell-C, Mobile Telephone Network (MTN), and Virgin Mobile.
Last year, 2012, cellular services were part of the angry backlash from consumers who felt that they were victims of poor quality and high service rates. Although cellular companies were spewing out promotions and special deals, the basic fees were thought to be too high. According to research experts, the use of cell phones in South Africa has become so critical for daily routines and needs, about 8% to 18% of a worker’s income goes to pay for cell phone charges, depending on the income bracket.
Part of their complaints includes disruption on service, poor customer service, and dropped calls. They are also angry about claims of fast and reliable 4G when they can barely enjoy 3G speed. In addition, they claim that the computation of monthly services have become so warped it’s become difficult to understand exactly what one is paying for in terms of other charges.
The SMS charges are also being questioned after an international research group published their opinion that the cost of sending a text message to any point in South Africa is about 2.6c but companies are charging as much as 80c.
This year with the intervention of the Department of Communications and the Parliamentary Portfolio Committee, all cellular companies have to follow regulation price setting which reduces the basic rate for fixed lines to 12 c and 40 c for mobile lines.
Cellular service companies like Vodacom and MTN explain that the infrastructure costs is one of the reasons for the rates and should the government push for lower rates, they would suffer tremendous losses and lead to lay-offs and retrenchments.
Obviously a common platform of quality service and business profit should be the main goal of the government in order to improve the situation. There are several proposals submitted in order to achieve this such as regulated competition, semi or full liberalization, and even mimicking the Venezuelan tactic which was introduced in 2007 that declares telecommunications as a basic human right which disallows profiteering at the expense of consumers.