By Nick Hedley for Business Day
The new mobile operator backed by prominent businessmen Patrice Motsepe, Paul Harris and Michael Jordaan is taking the fight over data prices to sector giants Vodacom and MTN.
Rain, a data-only network operator that launched mobile services two weeks ago, wanted to win over its rivals’ heavy data users with a simpler offering and competitive prices, CEO Willem Roos said.
Amid a decline in traditional voice revenues and public scrutiny over connectivity costs, data is becoming a major battleground for SA’s telecommunications companies, and the market is ballooning – Vodacom, MTN, Cell C and Telkom generated a combined R47bn in data revenues in SA in their financial years ended December and March.
Rain does not offer traditional voice services, but sells data for R50 a gigabyte, while outside of peak evening hours, its customers can use unlimited data for R250 a month, according to Roos, the former CEO of Outsurance.
In the two weeks since launching the product, “our business volumes have surprised us slightly on the positive side, particularly since we didn’t do any advertising”, he said.
“I really think we’ve addressed a few pain points in the market that customers have experienced, and although our offering is somewhat limited geographically and in being data only, for customers where that makes sense, I think it’s quite a compelling product.”
The metropolitan-focused operator plans to grow its network from 2,100 cellphone towers to 5,000 within the next three years.
Rain, which also offers fixed-wireless services, had mostly resolved “teething problems” related to delayed deliveries of SIM cards, Roos said.
The company, which is more than 40% black-owned, was promoting dual-SIM phones, where customers used Rain for data services and a rival’s network to make traditional voice calls. Roos said some customers were becoming comfortable with the idea of ditching voice-enabled SIM cards altogether and making all their calls on WhatsApp and other internet-based services.
With Rain’s coverage confined to cities and large towns, “we accept it’s slightly a niche product, but not small — I still think there are millions of people it would appeal to”.
Rain already lets Vodacom roam on its network and Roos said that it was considering giving mobile virtual network operators access to its spectrum and infrastructure.
“We have had discussions with a number of players. But I think the data-only aspect still needs to be proven, and we’re also keen on building our own business because the real value would lie in building a good retail business…. We’d like to become a decent-sized player.”
Africa Analysis director Dobek Pater said while it would take time for Rain to build market share, its mobile offering was likely to have a “significant” effect on the market.
It could stimulate competition by allowing new operators to use its network, while its larger competitors would probably have to reduce their data prices further, Pater said.
Bar some of Telkom’s offerings, Rain was the cheapest operator in the market for consumers who used less than 20GB of data a month.
“In terms of what Icasa [the Independent Communications Authority of SA] and the Competition Commission are trying to achieve in terms of reducing data prices and the cost to communicate, that will transpire to a large extent through private sector initiatives anyway. Competitive market forces will force prices down even further.”