Capitec CEO Graham Lee’s announcement on Wednesday that phone calls between Capitec Connect users are now free of charge is a significant development in the history of telecommunications in South Africa – but not in the way you might be thinking.
The South African mobile industry was built on voice. For most of its first 20 years, voice carried the network, the balance sheet and the share price, and data was insignificant. Today, voice has been comprehensively eaten – by data, by apps and by regulation – and the economics have flipped.
When Capitec offers free on-net calls between Capitec Connect Sims, it is not heroically subsidising a product the market values. It is giving away something the market barely pays for anymore.
Let’s start with the commercial motive. Capitec is not a mobile operator trying to grow a mobile business. It is a bank trying to deepen primary banking relationships, and Capitec Connect is one of several hooks used to do that.
Free intra-family calls – if mother, father and children all carry Capitec Connect Sims – is a network effects play. The more members of a household on it, the stickier the banking relationship becomes.
Cell C, which hosts Capitec Connect, understandably declined to discuss the structure of its wholesale agreement with its biggest MVNO customer, telling TechCentral only that termination rates are just one component of voice economics alongside traffic profiles, technology choices and proposition design.
Close to worthless
The clues are in Cell C’s remarks. Think about it this way: two Capitec Connect Sims calling each other are, in network terms, two users on the same underlying infrastructure – Cell C’s. There is no inter-operator termination charge to pay because the call never leaves Cell C’s network – even though, technically, Cell C uses MTN and some Vodacom infrastructure (yup, it’s complicated).
On a 4G or 5G network carrying voice as VoLTE, the marginal cost of a minute of call time is trivial; the expensive bits are the spectrum, the tower and the backhaul, which are paid for regardless. “Free on-net” for Capitec is the kind of deal that is easy to strike with Cell C when the thing being given away is already close to worthless on a variable-cost basis.
The trend in voice has been clear for some time. Look at MTN’s newly launched Pi brand, a digital network operator running directly on MTN’s network, which offers 500 voice minutes and SMSes for R79/month. That is under 16c/minute. Data plans start at R99/month for 5GB.
Melon Mobile, an MVNO that runs on MTN’s network, bundles “unlimited” voice and unlimited SMSes into its mobile plans. Its 5GB plan costs R199/month and its top 50GB plan is R599. “Unlimited” means, in practice, “more minutes than any reasonable consumer will use before the fair-use policy kicks in”. That’s de facto free.
Vodacom’s PowerFlex and MTN’s SuperFlex Sim-only tariffs have bundled unlimited calls at the mid-tier price points for some time. In that context, Capitec’s announcement is less a thunderbolt than a catch-up. What it does, however, is push the pricing bar at the prepaid end – where most of the market lives and where competitive intensity is highest.
The WhatsApp elephant
Something else to consider is that Capitec’s move matters less than it would have five years ago, because the thing being made free has been in structural decline for much longer than that.
South Africans long ago started moving their calling to WhatsApp, partly because it was free over Wi-Fi and cheap over data and partly because voice notes are often a better medium than real-time calls. A generation of consumers no longer thinks of “making a call” as dialling a number. They think of it as sending a message.
Watch: Ralph Mupita on competition, AI and the future of mobile
Voice once accounted for the bulk of mobile service revenue in South Africa. Today service revenue growth is almost entirely a data story, with voice in structural decline. The operators are responding by extracting what they still can from customers with sticky contracts, while investing in the data and fixed-wireless products that will carry the next decade.
This is why the Capitec announcement, while smart, might not pose an existential threat to the operators as it once might have done. They have already lost most of the voice revenue they were going to lose. What’s left is a long tail – business customers, older subscribers, off-net calls to people on other networks – that is less price-sensitive and more captive. Capitec’s free on-net call announcement is, in effect, the last rites for a market segment that was already one foot in the grave.
Joosub’s Spanish ghost
Shameel Joosub, Vodacom Group’s long-serving CEO, has been worrying out loud for years about the risk that South Africa’s mobile market fragments. Last November he warned that “lots of players and lots of regulation” had damaged European markets and pointed to the better outcomes in more consolidated ones.
He is entitled to that view. He ran Vodafone Spain from early 2011 to August 2012, which was the period in which that market started the slide from a three-operator oligopoly to the hypercompetitive, low-margin sector it is today.
There is genuine substance to Joosub’s concern. The risk is real that the combination of aggressive MVNO pricing, declining termination rates, commoditised data and a sluggish economy erodes operator margins to the point where capital expenditure on rural 5G and fibre slows.
Vodacom spent R11.5-billion on its South African network in the 2025 financial year, MTN R9.8-billion and Telkom R5.8-billion. That spend is discretionary. If returns compress, capex outlays will, too.
But any conclusion that regulators should ease pressure on the operators to protect their margins deserves scrutiny. Termination rates are the clearest test case.
Under communications regulator Icasa’s current glide path, the mobile termination rate for large operators drops from the current 7c/minute to 5c on 1 July 2026 and to 4c on 1 July 2027. There will be lobbying by the operators to slow or reverse that path on the argument that free calls are eroding the economics of running a network.
Long glide down
But that argument conflates two different things. Lower termination rates are not what killed voice as a revenue line; WhatsApp and the smartphone did. Termination rates did historically keep retail call prices higher than they should have been, and Icasa’s long glide path from a termination rate peak of R1.25/minute 16 years ago has been a rational correction. Raising them again would amount to asking consumers to subsidise a business model whose decline is structural, not regulatory in nature.
There are better tools – spectrum policy, rapid deployment rules, targeted rural coverage obligations – to support network investment than propping up the price of a product consumers have already abandoned.
So, the interesting question here is not whether Capitec’s free on-net calls is damaging to the market. They probably don’t do all that much, because the market has already repriced voice around zero.
The interesting question is what operators build next. Voice was a 30-year product. Data is already commoditising. The bandwidth-intensive services on top – streaming, gaming, cloud – are close behind. It’s why Ralph Mupita, MTN’s group CEO, is turning to data centres and AI. He knows data will become a commodity (it’s already well on its way there), and MTN – and the rest of the industry – need to figure out where to profit next.
The operators that thrive in the next decade will be the ones that monetise what sits above connectivity, and financial services is one that is increasingly important to them, taking them increasingly – you guessed it – into the same space occupied by the Capitecs of this world. – (c) 2026 NewsCentral Media
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