File picture: Siphiwe Sibeko

MTN Group is considering legal action after the Independent Communications Authority of SA (Icasa) lowered the cost of terminating calls on cellular networks.

Legal action “is one of the avenues where it could end up, but it would not be our preferred option”, MTN South Africa chief executive Zunaid Bulbulia said yesterday. “There’s multiple ways in which this could go.”

He said that if lower charges reduced investment, parts of the country’s cellular networks might face disruption.

The amount cellphone companies paid each other to end calls on another network would halve to 20c from March 1, Icasa said on Wednesday, confirming a proposal made in October last year. Cellphone termination rates would then fall to 15c from March 1, 2015, and to 10c a year later, the regulator added.

The big players would pay more to their smaller competitors when calls were made to the junior networks.

South Africa’s largest cellular operators, Vodacom and MTN, may cut jobs and curb investment because they would receive less for terminating calls. “If we as MTN aren’t able to continue investing, the implications for the industry going forward are an Eskom-type outcome where there’s rolling blackouts of the network,” Bulbulia said. “We just don’t have the free cash in our business.”

The regulator has reduced “asymmetry fees”, which help smaller competitors including Telkom’s cellphone unit and Cell C by charging them less to use the larger networks of Vodacom and MTN than those firms pay Cell C and Telkom Mobile for the same service.

Vodacom’s market share is about 43 percent and MTN’s 37 percent, according to BPI Capital Africa. Vodacom, which generates about 80 percent of its sales from South Africa, said on Wednesday that it was reviewing the effect of the regulator’s decision.

Meanwhile, MTN named Gold Fields general counsel Michael Fleischer as its chief legal counsel yesterday. He would start work tomorrow, spokesman Nik Kershaw said. Fleischer, who joined Gold Fields in 2006, would step down from today, the mining company said last week. Gold Fields is being investigated by the US Securities and Exchange Commission over the sale of a stake in its South Deep mine to a black empowerment consortium in 2010.

MTN also faces legal issues. Turkcell said in November last year that it was suing MTN for a second time over the award of an Iranian cellular licence. – Chris Spillane from Bloomberg