Call rates cut for six monthsComment on this story
Johannesburg - Today Vodacom and MTN will have to halve the rate they charge to connect calls from rival networks to 20c a minute.
This is despite the South Gauteng High Court ruling yesterday that amended regulations published by the industry regulator in the Government Gazette on Thursday were illegal and invalid.
But the tariff will not be in force for long because Judge Haseena Mayat suspended her finding on the regulations for six months only. During this period the Independent Communications Authority of SA (Icasa) will complete a costing exercise and review the future of call termination rates.
Later this week Icasa would communicate the steps it would take, Pieter Grootes, the general manager for markets and competition, said yesterday.
The ruling means smaller operators Cell C and Telkom Mobile will be entitled to apply an asymmetric rate. They can charge 44c a minute to receive calls from Vodacom and MTN but they will pay less to these operators.
Asymmetry is an intervention available to operators whose market share is below 20 percent.
The regulator’s main intention in dropping the rates is to foster competition, which is expected to lead to lower communication costs for consumers.
Vodacom and MTN went to court to challenge the validity of an earlier set of regulations, which Icasa proposed in January. At the time Icasa suggested the base rates would decline from 20c this year to 15c next year and 10c in 2016.
The matter was heard over three days last week, during which time Icasa published amended regulations that abandoned the later two rates. Vodacom amended its notice of motion to reflect the amendment.
Nkateko Nyoka, Vodacom’s chief officer for legal and regulatory affairs, said the operator would apply its mind and study the full impact of the judgment. The operator would consider an appeal only if it deemed it necessary after reviewing the judgment.
Zunaid Bulbulia, MTN South Africa’s chief executive, welcomed the ruling.
“MTN has been vindicated in its decision to take the matter on urgent review and request a final order. MTN now awaits a copy of the written judgment whereafter it will consider its options.”
Jose dos Santos, Cell C’s chief executive, acknowledged the judgment was “a step in the right direction” and said it was positive for consumers and the economy but he dashed hopes that prices for consumers would drop dramatically.
“Unfortunately, Vodacom and MTN have managed to frustrate the long-term process envisaged by Icasa to increase competition in the market, which would have resulted in lower prices for consumers in the long run.”
He argued that uncertainty over the rates over the next three years would continue to make it difficult for smaller operators to confirm their business plans beyond October.
“It also negatively impacts smaller operators’ ability to bring down prices to ensure all South Africans have access to affordable communications.”
Telkom, the largest fixed-line services provider, welcomed the ruling. The company’s Telkom Mobile subsidiary stands to benefit from the new regulations.
“The company believes that the ruling is in the best interests of the industry and will go far in reducing the cost to communicate for consumers and stimulating competition in the industry… Telkom will support Icasa in completing the [costing] process effectively and efficiently,” it said.
Arthur Goldstuck, the managing director for technology strategy firm World Wide Worx, said the ruling created an opportunity for four-year-old Telkom Mobile to compete “even more aggressively and start clawing back part of that huge gap between itself and the other operators”.
It was an opportunity for Cell C to leverage the rewards from asymmetry to invest in its infrastructure, which was lagging behind other operators.
The asymmetry was large enough for Cell C to pass on a price reduction to customers of between 5c and 20c a minute while still having the margin to spare on infrastructure.
He said the major networks could tweak their prices and packages but it was unlikely they would compete on price.
“They have the quality advantage for now, and will probably emphasise that. MTN is less nimble in responding to changes in market conditions, so there’s a good chance it will shed more prepaid users to Telkom Mobile and Cell C than will Vodacom,” Goldstuck said.
Vodacom lost 1.95 percent to R129.99 and MTN was down 1.12 percent at R215.55. Telkom added 0.45 percent to R33.65. - Business Report