By Gareth Vorster | 23 August 2012
The price war between South Africa’s mobile operators is set to continue thanks to the headroom in the local market for further price cuts, according to an analyst.
Despite numerous aggressively-priced voice and mobile data products launched by Cell C recently, the company’s CEO, Alan Knott-Craig, told MyBroadband there is a lot more to come from the company.
An analyst at financial services company, PSG Konsult, told BusinessTech that Cell C’s marketing campaigns have highlighted aggressive moves from the operator in the mobile space.
“It will be interesting to see how this pricing war plays out – particularly between Cell C, MTN, and Vodacom – as South Africa still has some of the most expensive pricing in the world. There is still plenty of room to bring these prices down further, cutting margins,” the analyst said.
Interestingly the analyst omitted 8ta, Telkom’s mobile arm.
By close of play on the JSE on Thursday (23 August), shares in Telkom breached R20 (R20.10) for the first time in several months, advancing 81 cents, or 34.20%, in intraday trade, taking its market cap beyond R10 billion (R10.46 billion).
The PSGK analyst said it was difficult to provide a range for the group, as investors await further clarity on an advised strategy from the Department of Communications.
At the start of June, Cabinet asked the minister of the DoC, Dina Pule, to report back to it about all the options that are available for Telkom in three months’ time (August), after government blocked the SA operator’s deal with KT Corp.
“Investors are waiting to see if the company will continue as a private entity or whether government will take control,” the analyst said.
He noted the rising share price for Vodacom was most likely as a result of Vodacom’s continued strategy to “pay a nice dividend” along with its attractive yield. “Investors are chasing yields at the moment.”
In the year to date period, shares in Vodacom have moved from R89.11, to R103.42 by close on Thursday – an intraday rise of 1.68% , setting the telco at a market cap of R153.88 billion. It reached a year-to-date best of R110.89 in April.
For MTN, the analyst pointed to some profit taking, following a good run in recent sessions.
“I still think MTN can reach its top estimates (R160) and even move beyond that. We back MTN due to its geographic diversity in Africa and the Middle East. With MTN in so many markets, it is less constrained to one country, which means that it wont feel the effects of a price war to the same extent as, say, Vodacom.”
In the year-to-date period, shares in MTN have moved from R144.50 to a closing price of R156.94 on Thursday, giving the group a market cap of R295.83 billion.
