Is this a Vodacom / MTN dirty little secret?

I have a simple question to float out there, that’s been banging around in my mind for a few years now:

Why has the iPhone (all versions) been so expensive in South Africa since it’s launch?

The question first emerged when I heard someone (when the iPhone was first launched in SA) suggest that Vodacom (the first SA supplier) couldn’t afford to price the iPhone anywhere close to International pricing levels because of how they’d priced the other phones in their stable. The way it was explained was that phones were priced based on quality, brand, features, etc, etc. Entry level phones where cheap and smart phones were expensive. This makes sense. If they priced the iPhone at international levels how would they sell their top end Nokias, Blackberrys, Samsungs, LGs, HTC’s, etc, etc. The iPhone was a top end phone, and top end phones got top end prices.Messing up their market was apparently more important than passing on the savings to their customers.

But if you remember back to the launch of the iPhone, one of the defining ‘features’ was that Apple came in with an exceptional phone priced at a ridiculously low price (in the US anyway). It was one of the reasons the iPhone became the big seller it did in the US and gained such a massive market share so quickly.

In South Africa many of us anticipated and hoped that it would be the same in South Africa. And of course it wasn’t. Getting an iPhone on contract required us to throw a fairly large chunk of change at the problem in order to secure one. We didn’t get the benefit our counterparts in the US did. We were disappointed and we ended up shelling out the money. What choice did we have?

A few weeks ago the iPad was launched in South Africa. The iPad has come into the country via The Core Group (the official Apple agent in SA). Entry level iPad’s are being sold at around R4300. 16gb of memory, and wifi with no 3G. It’s this that got me writing today’s post.

In my mind the iPad is a superior product to the iPhone. However you cut it, it must be more expensive to build, transport, store, etc, etc. So why is it at least 50% cheaper than an iPhone? The only difference I can see is that the iPhone is distributed through Vodacom and MTN and the iPad through Apple (via The Core Group)

In researching this post, I’ve found it difficult to get exact prices on iPhones. So while I can’t absolutely confirm the numbers I’m about to quote, I do believe they’re pretty close, based on the number of articles I’ve read and the numbers I’ve seen. I finally settled on data from Memeburn (a great SA resource for tech news and information)

In their article, ‘Comparative pricing study: How do you like them Apples?‘ they suggest:

  • we’re paying R4399 for an entry level iPad (16gb), which is 21% more than our US counterparts
  • and between R7000 – R7999 for an entry level iPhone 4 (16gb) – no US comparison offered.

I’d like an answer from someone (anyone) as to why this is so? The only credible explanation I can come up with is that the iPhone prices are so high because Vodacom can! And why hasn’t MTN launched the iPhone 4 at international pricing levels? I can’t confirm for sure what they’re selling the iPhone 4 at on Pay-as-you-go (there seems to be so little information available) but if they’re anywhere close to Vodacom, it’s because they can as well.

It’s the sort of story that Carte Blanche should pick up in my view? Or Aki Anastasiou on 702? Or the Competition Commission should investigate? Or South Africans should be a little more vocal about?

You’d hope there’d be a credible explanation, but the cynic in me thinks not. I’d like to be surprised. I’d like to know if this is a dirty little secret or not?

 

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7 Responses to “Is this a Vodacom / MTN dirty little secret?”

  1. Franco van Vuuren March 7, 2011 at 10:02 am #

    Same for the BB as well. I strongly believe they keep the prices high between them to maintain a market they can’t let go.

    We need some serious competition in SA!

  2. Barrie Bramley March 7, 2011 at 2:22 pm #

    You’re probably 100% correct Franco. I don’t use BB, so I’m not as in touch with the number and costs

  3. Warren Larkan March 7, 2011 at 7:17 pm #

    Well said Barrie. I do however think the fact that the new iPad has recently been launched in the rest of the world could mean that we have become a dumping ground for old technology. In our country Apple products are sometimes two thirds more expensive thanks to The Core Group. I think Apple’s monopolistic distribution model in our country lends itself to inflated prices, and encourages grey imports.

  4. Jo Quinn March 9, 2011 at 4:05 pm #

    This is an issue throughout South Africa that is ignored completely. We are constantly ripped off with monopolies such as Vodacom and MTN and now the likes of Telkom and Neotel (for the love of all things good – DO NOT go with Neotel as they have very VERY dodgy business practices).

    You go to Woolworths, to Pick ‘n Pay and to Checkers and the prices of 99% of their goods are the same. Why? Because as a nation, we seem too stupid to realise that there is no way in hell our prices for locally grown produce should not be more than a country (like the UK) that imports everything. Why is the local Caltex Fresh Stop cheaper than the three major retailers in SA? And let’s be fair, the Competition Commission does absolutely nothing of value because how can all the largest monopolies charge EXACTLY the same (exorbitant) prices for produce and goods. How can they get away with that?

    I decided to give Neotel a chance and all they did was lie, cheat and defraud me. And have continued to do so for the last 2 years. Who can I complain to? Who protects me as a consumer? No one.

    Why? Because monopolies rule South Africa and there is nothing the consumer can do about it.

  5. John Ludike March 19, 2011 at 10:05 am #

    I have found the simple solution to be to stop over and or spend time when connecting to Europe/Asia flights in Dubai and literally “stock up” on all, notebooks, phones, tablets, phones, camera’s etc. I know id doenst transform the industry or anything but makes a little diffrence to family, friends etc all who have student kids etc. etc.

  6. Jonty Fisher April 7, 2011 at 9:07 am #

    Hey Barrie,

    Good read. I agree with Warren in saying that I think a more indicative comparison would be the pricing of the iPad 2 when it is launched in SA. The iPad 1 was undoubtedly ‘dumped’ in SA an other tertiary markets to get rid of dead stock before the launch of the iPad 2. Apple has a habit of introducing second generation products faster into new markets if the predecessor exists, so hopefully we won’t be a dumping ground for iPad 2 as well.

    However, I think you’ll still probably find that iPad 2 is priced similarly to the iPhone in our market, which means that your same argument would still stand. I totally agree that the iPad is a superior product to iPhone, and thus there should be a consistent difference in price, which there ain’t.

  7. Steve May 17, 2011 at 2:21 pm #

    Hey Barry,

    The orginal iPhone took so long to come to SA because Apple demanded revenue share of users’ phone bills.

    Then Vodacom got it through a Vodafone Live deal the latter did with Apple.

    As to the price, well who knows. The networks do funny thing with phone pricing. Like in my latest blog, http://www.intrinsicmedia.co.za/2011/05/nokia-positioning-for-smartphone-growth-in-sa/. MTN basically charge notihng for the N8.

    I think its to grow data ARPU… Cos they are giving away a R4000+ phone for nothing on contract.

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