The upcoming 50% cut on March 1, the first in a series of revised mobile termination rates (MTRs) over the next three years, has been widely welcomed by stakeholders.
The Independent Communications Authority of South Africa (Icasa) was preparing to implement the new glide path with a reduction in MTRs from the current 40c to 20c.
The revised termination rates, which also included an asymmetry plan, would see a further decrease to 15c in March 2015, before declining to 10c by March 2016, while the asymmetry would be set at 44c, before declining to 42c in 2015, 40c in 2016 and 20c in 2017.
This would allow smaller players with less than 20% market share, such as Cell C and Telkom Mobile, to charge dominant players, such as Vodacom and MTN, the asymmetric rate, while only being charged the lower rate themselves.
Cell C said the new rates would promote and foster a more balanced and competitive mobile industry to the benefit of consumers, while allowing the mobile market to continue its path to become more competitive on a sustainable basis, acting CEO Jose Dos Santos said.
“Without this intervention it was likely that the South African market would have continued to have been an effective duopoly to the detriment of the consumer, industry and the South African economy,” he added.
Vodacom said that while it was supportive of lower termination rates, South Africa’s largest mobile operator expressed concern about the potential adverse impact of the revised termination rates on its customers, partners and suppliers, on the back of the “aggressive” asymmetry structure.
“We feel that the level of asymmetry is unjustified and that there is no clear basis for the differential. This asymmetry is clearly a subsidy for the smaller operators,” said Vodacom CEO Shameel Joosub.
“This is a subsidy, which in effect means that Vodacom will be charged more to call Cell C and Telkom Mobile than the latter will be charged to call Vodacom. This prejudices Vodacom’s customers and rewards those who have not invested in their networks at the expense of those who have,” he explained.
Vodacom said in a statement that it would review the potential impact, both internally and externally, and announce the steps needed “to adjust the business model”.
However, Huge Telecom CEO James Herbst believed that the MTR cuts were a “game-changer” for the company, while Communications Minister Yunus Carrim said the glide path would serve the country’s interests.
“We would like to see these new rates contribute to consumers and business paying less to communicate and benefitting economic growth and job creation over time. The high costs to communicate have deterred global and domestic investment in this country,” he said.
Telkom would pass the MTR reductions on to its consumers after assessing the impact of the regulations, Telkom head of strategy Miriam Altman said.
“This brings the market closer to parity in termination rates, supporting the move to convergence between fixed and mobile services. Telkom has for many years subsidised the dominant mobile operators and this move will begin to level the playing field,” she noted.
The fixed termination rate for Telkom remained at 12c in respect of local interconnection for the coming year, while the rate for national interconnections would fall from 19c to 16c.