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Vodacom Hikes Prices Due To VAT Increase

Author: Jason Snyman
Date: 2018-03-09
With prices being hiked and the industry recording an R80bil loss; investors don’t know where the spectrum will be anymore.
The telecommunications industry has been in the headlines a lot lately. From data leaks / revelations of our location data being sold, all the way to losses of billions due to government interference. We can hardly avoid the bad news. For starters, Vodacom has announced plans to hike its prices due to the looming VAT increase. While exact prices haven’t been announced yet, the company has started to deliver the news via SMS notifications to customers.
“Dear Valued Customer, The National Treasury announced an increase in Value Added Tax (VAT) from 14% to 15% effective 1 April, 2018. There will therefore be an adjustment to your subscription as our services are subject to VAT. Yours sincerely, Vodacom.”
All billable Vodacom services will be subject to this increase. These include contract subscriptions, bundle services, and out-of-bundle rates for voice, data, and SMS services. Cell C and MTN have also announced adjustments to their pricing. It’s not all doom and gloom, hopefully. But before we get to this week’s silver lining…
Do you know who has the best data deal in SA?

The Telecommunications Industry Lost R80 Billion Last Year

Due to policy and regulatory uncertainty, the SA telecommunications industry lost R80 billion in market cap through 2017. At least, these are the reasons cited by Vodacom CEO, Shameel Joosub, while speaking to the Department of Telecommunications at a workshop on the Electronic Communications Amendment Bill. It makes perfect sense, because the threat of losing their spectrum has struck a blow to mobile network operators. The market is also an absolute mess, and this has been reflected in the share prices of network operators. To understand the rest, we need to understand what the ECA Bill is and what it entails. This next part may bore some of our dear readers to tears, but it is vitally important.

The ECA Amendment Bill

See, key industry players, such as Vodacom, have been holding discussions with the department over the last year regarding this Bill. These discussions are said to have reached certain outcomes, and Vodacom claims that the update of the draft Bill has failed to incorporate those decisions. Firstly, the ECA Amendment Bill will pretty much strip the regulator of all powers. The regulator being ICASA (the Independent Communications Authority of South Africa), which has been doing a fair amount of important work lately.
  • ICASA will be diminished to nothing more than a ‘recommending body’;
  • All final powers will rest with the very incompetent, very corrupt and very-much-useless-in-every-single-way Department of Telecommunication and Postal Services;
  • ICASA was designed to be this authority;
  • What are postal services, we hear you ask? We’re not sure either.
There are three other key issues to focus on in this Bill, which has Vodacom absolutely losing its mind.
  • There are plans to create a monopoly network. Called the Wireless Open Access Network (WOAN) – it is a system that has been abandoned in the few countries which have considered it. Because, if anything, South Africa is incapable of learning from the mistakes of other countries;
  • Mobile network operators, such as Vodacom, which have invested billions of rands, will be required to return previously allocated spectrum;
  • Mobile network operators will be forced to provide access to their network infrastructure to competitors at cost-based pricing.
According to Vodacom, a ‘hybrid option’ had been discussed. This involves operators receiving a portion of the available spectrum – and the government-sanctioned WOAN receiving a portion. This makes no appearance in the updated draft, much to Vodacom’s displeasure.  

The Expropriation Of Spectrum

The wireless frequency spectrum we’re talking about is basically the additional network capacity needed in order for us to get wider 4G coverage in South Africa. It will also make reduced prices and better network performance possible. Instead of the discussed hybrid option, Vodacom stated the draft Bill currently proposes the following:
  • Withholding the licensing of high-demand spectrum until the WOAN is functional;
  • Taking back all licensed spectrum from operators and giving it to the WOAN;
  • Cost-based wholesale access.
“We have R100 billion that we’ve invested into our network. If we have to return the spectrum, it becomes expropriation. That investment becomes useless,” said Joosub.
Vodacom disagrees with the Bill in its current form, but says that there are aspects it thinks could work. For instance, a WOAN – in a hybrid model – will motivate all the smaller players to work together. They could pool all their money for one super-efficient network investment. Where smaller entities now try to compete with MTN and Vodacom’s annual R9 Billion network investments, they could put their resources into the WOAN instead. The WOAN will enable smaller and emerging operators to access currently-unassigned high-demand spectrum. But, should the already-allocated spectrum be taken away from network operators? Companies which have worked so hard and put so much time and money into building something profitable? Probably not. Government monopoly on anything, including cellular networks, is a terrible idea.

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