MTN said it had agreed to cut the cost of its data bundles on Friday after the competition watchdog warned in December that the telecoms operator and rival Vodacom faced prosecution if they did not do so.

A two-year inquiry into data services which concluded late last year found prices charged by the top two operators, which control about 70% of its wireless broadband market, were higher than in other African markets they operate in.

MTN said it would reduce the cost of monthly data bundles of 1 gigabyte (GB) and below by between 25% and 50% from April 15, after a finding that South Africa's mobile data prices were the highest on the continent.

The price of its 1 GB monthly data bundle will fall by 33% to 99 rand ($5.73) from 149 rand, MTN said in a statement, after the Competition Commission said the preliminary evidence suggested there was scope for price reductions of 30% to 50%.

MTN will also provide each of its 29 million customers in South Africa with 20 Megabyte (MB) of free data daily through its instant messaging platform, Ayoba and offer 500 MB of free data access to up to 500 public benefit services websites such as health and job sites every month.

"In the short-term you'll basically see some reduction (in revenue) but as I said there is something called elasticity. You drop the prices, you increase the demand, you increase the volume and money returns," MTN South Africa CEO Godfrey Motsa said in a webcast.

MTN expects the growth of its South African prepaid data service revenue to return in a couple of quarters.

In the year-ended Dec. 31, MTN South Africa's consumer prepaid service revenue fell by 4.1% as the prepaid business came under pressure due to amended mobile data regulations, which require mobile operators to roll over unused data and prevent automatic out-of-bundle data billing.

Between February 2017 and February 2020, the effective data rate on the MTN network has declined by 76%, Motsa said, adding that there is significant urgency for the release of 4G and 5G spectrum in order for telecom firms to further reduce prices.

Telecoms regulator Icasa will conclude licensing of high demand spectrum via auction before the end of 2020.

Vodacom this month also agreed to cut data prices by as much as 40% and announced that it would reduce the price of its 1 Gigabyte of 30-day data to 99 rand from 149 rand.