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South Africa’s MTN, Vodacom Shares Slide on Talk of Price War

A potential price war between South Africa’s two largest mobile-phone operators has made Vodacom Group Ltd. (VOD) the second-worst performer among the nation’s biggest stocks this month.

Vodacom, the wireless company with the most South African subscribers, has declined 6.7 percent this month, making it the second-worst performer on the 42-member FTSE/JSE Africa Top 40 Index in April, after media company Naspers Ltd. MTN Group Ltd. (MTN), Africa’s biggest mobile-phone company, slid 1.2 percent. The gauge of South Africa’s largest and most liquid stocks gained 1.4 percent over the same period.

The Johannesburg-based operators are being squeezed by declining voice revenue as the nation’s communications regulator cuts tariffs, while the market has become saturated with 130 mobile-phone subscribers per 100 people as of end 2013, according to data compiled by Bloomberg. MTN has cut its prepaid tariff to 0.79 rand ($0.07) per minute, undercutting Vodacom’s 1.20 rand.

“People are worried about this new prepaid tariff of 79 cents,” Craig Hackney, a London-based analyst at NOAH Capital Markets Ltd., said by phone on April 25. “People are worried that Vodacom may need to respond to that and that there is not enough voice elasticity in the market to compensate. It’s probably concerns about them being pulled into a price war.”

Streaming Movies

Vodacom and MTN are exploring ways to get tablet and smartphone subscribers to use more higher-margin data services as voice revenue slides. MTN is said to be in discussions with an Asia-based content provider to offer access to streaming movies and television shows to its domestic market, people with knowledge of the talks said last week.

The Independent Communications Authority of South Africa cut the amount wireless-phone companies charge each other to end calls on other networks, also called mobile-termination rates, in half to 0.20 rand on April 1. A high court ruled that the move was unlawful on March 31, meaning it may lapse after six months.

“There is a lot of uncertainty around” the court’s decision, Hackney said. The regulator is forced back “to the drawing board,” he said.

Vodacom fell 1.6 percent to 120.99 rand, its lowest intraday level since March 12, by 10:01 a.m. in Johannesburg. MTN rose 0.8 percent to 211.90 rand.

To contact the reporter on this story: Jaco Visser in Johannesburg at avisser3@bloomberg.net

To contact the editors responsible for this story: Vernon Wessels at vwessels@bloomberg.net John Bowker, Emily Bowers

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