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Consumer Affairs
Sunday, April 1, 2007
Naughty network

Consumers just know they are being ripped off by local cellular phone providers in South Africa. Following its findings announced recently the Independent Communications Authority of SA is launching an investigation into the cellular network industry. This will be in terms of the Electronic Communications Act 2005.
Hopefully Icasa will look, not just at pricing and whether there is collusion in that regard but also the nature and structure of the contracts. Costs are one thing but the period over which your contract runs also affects the final total cost of the deal. In this country, as far as I know, virtually all contracts involving a ‘free’ or subsidised cellphone are over two years. Essentially the capital cost of the cellphone is amortised over two years and, together with any airtime value, is debited to the client’s account by debit order each month.
In the UK for example, the contracts are mostly for 18 months, and there are some aggressive swap out packages allowing people to change what they had originally agreed.
Take a contract such as a business top up with Vodacon costing R324 a month for a Nokia 6280 over two years. The total cost is R7 776.00 approximately, and includes about 96 hours of talk time in all.
There are about six or seven network providers in the UK and, if nothing else, vie for business with a fantastic variety of packages and deals. For about the same monthly amount and similar cellphone you get 150 ‘anytime’ minutes (that is none of this peak and off-peak nonsense) plus 100 sms texts per month, plus ‘free extras’ from which you can choose out of about six options: 50% extra minutes, for example.
So you get about 67 hours plus 1 800 sms texts for R6 450.00. Rough calculation, by converting the sms value to airtime it would otherwise be 80 hours of airtime (without sms text option).
To recap, for 80 hours in UK you pay R6 450; in SA you pay the equivalent of R5 800 for 72 hours (18-month period), but you still have R1 900 odd to pay.
To cancel a contract in South Africa you have to pay the balance of the two-year contract (obviously) but how they arrive at the cancelled value is a mystery. For the contract above, over two years it would cost R7 776.00. A cancellation value quoted just recently was R7 250 after four months of the contract.
This seems incredibly excessive given that airtime, which had been included in the contract (obviously) would not be used. It doesn’t make sense when you consider the Nokia 6280 costs R3 278 cash price. What on earth is the R4 000 odd difference for?
Hopefully Icasa will deal with this monopolistic industry and get prices slashed to more reasonable and honest levels. By Nigel Benetton
PS why does it sometimes take three hours for an sms to arrive?
End of this Book
Note on calculations:
R324 * 24 = R7 776; cost of call R1.72, R1.49 and R0.90 depending, use average R1.31; assume R315 of calls/month /1.31 = 4 hours a month or 96 hours for 24-month contract (equiv 72 hours over 18mths). To compare 324 for 18mths is R5 832
£25/month for 150 mins/mth and 100 sms/mnth @14.35 = R358/month.= R6 450.PLUS extra 75 mins/month. = 225 * 18 = 67.5 hours and 1800 sms.
Sms cost 80c peak, 30 off peak, average 58 cents * 1800 = R1 044 in value. Div by SA average tel /min cost of R1.31 = 1044/1.31 = another 13 hours.

Copyright © Insurance Times and Investments® Vol:20.3 1st April, 2007
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