Why data is expensive is one question more asked than answered especially here in Uganda, with no satisfying answer offered depending on whom you’ve posed the question to. In comparison to our immediate East African neighbours, their data charges are relatively low compared to ours.
Putting comparisons aside, in a recent Facebook Live interview (Watch Video) with MTN Uganda’s CEO Wim Vanhelleputte, many questions were directed towards him but the outstanding one was when he asked if data prices will go down from a one Philip.
His surprise response was that actually MTN is providing data below or at almost cost price and voice revenues provide for the subsidies that make this possible. What he blamed for high data prices is the rate of smartphone adoption which he says is below 20% to drive usage or data consumption.
The more data is consumed on the MTN network by subscribers, the more volume is used on their side thus providing an incentive to reduce data prices in order for the company to recoup its initial investment in building the data network. As of this writing, it hasn’t been achieved yet.
For now the revenue that accrues from voice (Which makes up a majority of MTN revenues but declining) and Mobile Money is used to subsidize data thus the statement of selling at near cost price.
However, he provides a comforting assurance that overtime data prices will go down of course with more smartphone adoption and of course heavy use cases for the volumes provided.
He also provided hints that it is for this reason that data only providers are struggling financially and are starting to make forays into the voice segment. Data isn’t a cash cow as we might have thought but we are getting there, voice leads and Mobile Money while data trails the two. Whereas we can agree that voice revenues are dwindling, Mobile Money is offsetting the loss as it continues grow.
All this can be exhibited in how cell tower space is allocated to telecoms according to an industry observer. Telecoms rent this space lets say for $2000 and a fair share is given to one that needs more capacity than the other and the split is as follow; 50% to volume, 30% to Mobile Money and 20% to Data on which telecoms strive to make a profit. So a telecom that purely deals in data will have to foot the $2000 bill at the end of the month to the tower provider yet they have no auxiliary voice or Mobile Money revenue like lets say MTN.
This can explain why we often hear about data only telecoms struggling to stay afloat than those with a diversified services portfolio more so if they deal in voice and Mobile Money. The above reasoning can still explain why so far MTN and Airtel declare profits while the rest of the industry keeps mum about their finances. Maybe they’re privately held so there is no obligation of declaring their finances but qualms about them struggling often come from within than outside.
Does this mean data is doomed?
Nope, it doesn’t. Data is the future considering the connected world that we live in and one that awaits us though usage isn’t fast enough for the investors to have a return on their investments. So long as the current usage cannot sustain the said investment, data price will still be high.