What are your options in the cellular market? David le Page takes a look
As the winter chills descend, the thought of warming your ear and adjacent cerebellum with microwaves can become attractive, and you’re considering leaping afresh, or for the first time, into the cellular market.
It’s a good time to do it. Pressures in the industry are forcing innovation, and previously indistinguishable options are giving way to new offerings from networks and service providers.
The introduction of pre-paid cell use particularly has increased consumer choice and continues to build the market. Now, at least 50% of new subscribers are taking pre-paid options, and they will account for 25% of industry revenue growth this year.
An analyst says average monthly revenue per subscriber is decreasing, from $97 per- customer in 1997, to an anticipated $47 in 2000. The proportion of South Africans using cellphones is expected to triple over the next eight years, increasing the present 5,6% penetration to 15% by 2007.
New uses for cellular chips, such as automated service notification in cars, and the Mosaic “ATM in your hand” system (which allows you to download cash onto a smart card using your cellphone), can only increase this.
One analyst says competition is more likely to be at the level of service and network quality, at least until Telkom’s fixed-line monopoly ends and the cost of inter- connection to the networks can drop. Rates reductions are what drive market penetration though.
Industry revenue during 1999 is likely to grow 53%, with earnings being higher for the networks, but lower for the service providers.
So the figures are healthy for networks and service providers. What about the rest of us? The cellular marketers don’t make it easy to compare eggs with eggs, but a bit of playing around with the figures for different contracts and pre-paid packages allows one to come close.
These examples (see table) look at the cheapest options for lightest users, and chattier people.
In the former case, 15 minutes a week may not seem like much to the average Sandton resident, but for those who only receive calls, or choose to keep a phone for emergencies, it’s a viable option.
Assuming there’s parity between the quality of the network coverage in your area, you’re going to shop on price. What do these figures tell us about paying for cellphone usage?
Well, if you’re going to be a light pre- paid user, go Vodacom and if you’re going to be a heavy pre-paid user, go MTN. In fact, if you’re going to be a really light user, then it makes sense to stick with a pre-paid option even if you qualify for a contract.
Either way, always make sure you use the biggest possible airtime cards, reducing your cost per call.
When it comes to contracts, work out your likely usage patterns, and do the calculations. Your own habits will determine the differences between the competitors.
If you’re a Vodacom user, forget about going for the family time package. Just R19 extra a month for the Weekender package gets you those 120 free weekend minutes.
If you’re largely a leisure user, the MTN Companion package definitely beats the Vodacom Weekender+. Even if you factor in another 20 off-peak minutes a month to bring it to a matching total 120 minutes as well, it stays under the cost of the Weekender+ at R3062,40, while keeping the flexibility of those 15 weekday minutes.
The weekend-use packages are good value – if you restrict your use to weekends. But once the convenience of the cellphone grows on you, you may well find yourself outside the bounds you originally set yourself, paying a fortune for peak-time calls.
How many weekday minutes a month should you be using to stop thinking about the low- use, higher-charging packages, and start looking at the lower-cost, bulk purchase of airtime? Just 60, if you prefer Vodacom.
Get into the habit of using that cellphone, and with a monthly cost of R129 and peak- calls charged at R2,51 a minute, just an hour’s weekday talking each month takes you to the R280 cost of the Talk 100+ package. Since peak calls on Talk 100+ cost a whole R1 less a minute, the Weekender makes no sense beyond this point.
MTN, in this instance, is the better connection. Only once you’ve pushed your Companion weekend contract to 78 weekday minutes a month (including the 15 free peak minutes), should you be wishing you had purchased the Performer package.
What of the new MTN Sharetime package? The package gives you two numbers on one account, at a cost of R180 a month, or R90 a person. But don’t touch it, unless you’ve done your sums very carefully indeed and are absolutely convinced that you will not be exceeding the 150 free weekend minutes and 30 free weekday minutes that you and whoever will be sharing – because MTN have used the Sharetime contract to introduce to the market some of the highest rates yet seen.
Exceed your quota of free minutes, and you will be paying R2,80 peaktime, or 85c off- peak. Moreover, the package gives you only one subsidised phone. If you potential Sharetime users pay an extra R24 each month, you can each get a Companion package. You’ll both get subsidised phones, 10 extra weekend minutes a month, separate accounts and lower call costs.
If you’re not in too much of a hurry to make a decision, it is worth waiting for a new service due from GSM Cellular in August, which is bound to push its market share up exponentially while doing Zolani Consumer a pretty good service to boot.
At present there is very little market “churn” amongst contract cellular users, who tend to be quite loyal to their networks. Pre-paid subscribers, however, can pick and choose far more easily according to their needs.
And the betting is pretty good that a good number will decide that the new GSM system suits their needs very nicely.
The system will remove the pre-paid element from a card and put it on to a central billing system. This will enable pre-paid customers to take advantage of rates at Vodacom Weekender+ rates (68c off-peak, R2,50 peak-time, R1,68 peaktime cellular- to-cellular). You’ll pay upfront each month for the time you expect to need, and then go ahead and use it.
When you’re running out of funds, you’ll be alerted (or cut off) by the Telemac software that is about to become standard in local cellphones. All this without the hassle of credit checks, and with a subsidised phone which will be yours after 24 months.
Since the Telemac system will be licensed only to GSM Cellular, GSM’s projection that they will have up to 15% of the pre-paid market within six months does not seem outlandish.
One contradiction of the cellular market is that pre-paid subscribers, on average, are charged more for their calls than contract subscribers.
In most markets, credit costs more because of the risk taken by the vendor and because they wait longer to receive their money, losing out on potential investment value. Those who pay cash, on the other hand, are favoured with lower costs.
This is obviously not the case with the cellphone market which has favoured credit users, while pre-paid subscribers pay for the convenience of avoiding a credit check.
As one industry figure puts it, at present “it’s harder to get a cell contract than to buy a new car”. Hopefully, the new payment options should reverse this bizarre situation.
ENDS