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Part 1: Why are broadband prices so high in South Africa compared to Kenya?

This is a sequel to my earlier post on the price war started by Cell C with its data specials that were introduced late in 2010.

While in Kenya on a social media assignment last week, a friend told me that he pays 1 Kenyan Shilling for an SMS. As at 1 October 2011, 1 South African Rand (ZAR) = 12.38 Kenyan  Shillings (KES). When I convert Kenya’s cost of SMS in South African currency, this comes to 8 cents. The cheapest SMS rate in South Africa right now is 15 cents. Thus, this is close to 100% more expensive than the Kenyan rate! Why?

I decided to perform a more comprehensive comparative exercise of the 2 countries above, but looking specifically at mobile broadband prices – a deliberate choice given that this is the new gold for all telecom companies the world over. The results were startling, as the table below shows.

 

 Use the grey bar at the bottom of the table to scroll to the right and see columns that lie out of view.

 

Notes about broadband prices:

 

Only the top 2 mobile operators for each country were picked for comparison of broadband prices in the table above.

Safaricom alone has more than 70% of Kenyan mobile telecom market share, while Vodacom owns just under 60% of South African market share.

Data bundles and associated costs come from the selected companies’ websites as at 1 October 2011.

Only normal prices were used in the comparative exercise. Promotional prices were not considered. In the case of Vodacom, only standard data bundle were used. Advanced data costs were ignored.

Kenyan prices were converted into South African prices, using the exchange rate (see column with GREEN fonts) as at the 1st of October 2011.

It is acknowledged that this exercise is being conducted during a period of high currency turbulence in both countries under review. However, it is assumed this affects them equally.

A quick glance at cost/megabyte for the selected companies can show that South Africa data costs are astronomical.

Safaricom and Vodacom have the widest data bundle offerings of the 4 telecom companies. As a result, their cost/mb were compared directly, as shown in cells with RED fonts. The last column clearly shows the magnitude of cost discrepancies between South Africa and Kenya for comparable data bundles.

I found it striking that close to 60% of MTN’s data bundles are sold by Vodacom as well, while Airtel’s bundles are unique from Safaricom’s. This may point to the high level of vibrant competition found in the Kenyan mobile market, which is limited or lacking in the South African market.

While I selected only data for the mobile broadband price for the comparative exercise, this observed discrepancy occurs across all the mobile telecoms cost items of the two countries.

 

RELATED POST:Mobile data usage to ramp up in South Africa in 2012… with provisos

 

This raises the question

 

Why are South African mobile broadband prices so high? Is this because there is little separating data offerings by the two largest mobile operators?  Anybody knows?

 

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