24% Interconnect price cut by December

Sounds like a good Christmas bonus.
Or is this just Gauvamunt's way of (indirectly) putting something into the consumer pocket that they could rip out multifold in another guise to serve their own dubious purposes?
 
These news articles about interconnect cuts are beginning to remind of all the Seacom articles promising massive reductions in price :rolleyes:
 
Great news, but it remains to be seen how the operators factor it in. This is revenue Vodacom and MTN, in particular, have been relying on for some time now. And to suddenly just kiss it goodbye? We'll see.
 
Anakha56 said:
Sure this is great news but why the frig cant government take this hard line approach with Telkom? Maybe its because governement has all those shares in Telkom...

I love this news but for the life of me I want to know why a hard line approach cannot be taken against Telkom?
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Think dude; it's one of the few state (ANC) owned entities that still has the potential to make money.

Why kill the golden goose:confused:
 
McT said:
Great news, but it remains to be seen how the operators factor it in. This is revenue Vodacom and MTN, in particular, have been relying on for some time now. And to suddenly just kiss it goodbye? We'll see.
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The potential revenue loss is not all that high. The revenue from that VC and MTN receive from interconnect fees is largely offset by the fees they pay to each other and the other operators. If you ignore Telkom interconnects then the net effect of changing the interconnect rate on the bottom-line of any of the cell companies would be negligible as any reduction in revenue will be offset by a reduction in cost. The fact that Telkom is only charging an interconnect fee of 25c while paying 125c will result in some loss to the cell companies and gain to Telkom if the 125 is reduced to 95.

However unless the cell companies start charging the customer less the total profit made by the combined operators will not change.
 
mikef said:
The potential revenue loss is not all that high. The revenue from that VC and MTN receive from interconnect fees is largely offset by the fees they pay to each other and the other operators. If you ignore Telkom interconnects then the net effect of changing the interconnect rate on the bottom-line of any of the cell companies would be negligible as any reduction in revenue will be offset by a reduction in cost.

However unless the cell companies start charging the customer less the total profit made by the combined operators will not change.
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If this is true (and yes it make sence)? then why do they (VC & MTN) fight (are reluctant to drop fees) to keep it high?
 
PPJ said:
If this is true (and yes it make sence)? then why do they (VC & MTN) fight (are reluctant to drop fees) to keep it high?
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I am not an expert but I think there are primarily two reasons:

  • By retaining a high interconnect fee it is difficult for a new entrant to the market (also the VOIP suppliers) from undercutting their retail rates. Effectively any new entrant can not charge a customer less than the interconnect fee plus his cost for calls terminating on a competitors network.
  • They are benefiting from Telkom in that they are receiving more for calls terminating on their networks than they are paying for calls terminating on Telkom's network.
 
dj_jyno said:
What about all the contract customers on MTN's Anytime packages? How is MTN going to adjust those tariffs, or are we getting the short end of the stick again?
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I'd like to see how that plays out.
Contract users should go and read the fine print.
Off the top of my head (with no reading whatsoever) I'd reckon there's going to be no price drop for contract users, as they've been locked in for their packages for two years.

No way that MTN or VC is going to let you all off the hook just yet ;)

mikef said:
Actually I do not believe there will be much resistance from any of the cell companies - at 90c it is still substantially above their cost (I would have liked to see a more challenging interconnect fee of say 25c) - just as I do not believe the reduction in interconnect will have a substantial impact on consumer cost.

However even a reduction to 25c does not imply much saving in consumer tariffs.
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This is what I thought to when reading the numbers in the article.
How is the consumer going to benefit from this imminent change.

At least it's a plan set into motion.
 
Shake&Bake said:
I'd like to see how that plays out.
Contract users should go and read the fine print.
Off the top of my head (with no reading whatsoever) I'd reckon there's going to be no price drop for contract users, as they've been locked in for their packages for two years.
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I don't mind being locked in at my current rate for the next 12 months, but what happens once I upgrade? Remember, MTN Anytime charges are the same for calls to all networks - this is where the problem comes in. (How) will they reduce those prices?
 
dj_jyno said:
I don't mind being locked in at my current rate for the next 12 months, but what happens once I upgrade? Remember, MTN Anytime charges are the same for calls to all networks - this is where the problem comes in. (How) will they reduce those prices?
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Well, I for one can't think of how the current 30c is going to translate or be passed onto the consumer at the moment.

I doubt there is going to be any immediate impact on pricing - or there may well be, by simply cutting their margins a bit as those margins have always been inflated anyway.

But if government and ICASA manage to get it down to 60c over time, then it should really translate into savings.

Thing is to reach that 60c margin is going to take time and the operators are obviously going to go out of their way to reorganize their pricing structure that it's once again going "con" the unsuspecting consumer.
 
i presume the mobile operators will adjust their cost accordingly by upping all packages by that amount?
 
Don't let ICASA into the mix, they will just screw up everything like they've done with every single other project they were involved with!
 
As has been pointed out, this will benefit the smaller players and help them attract new customers.

If MTN/V are charging R2.50 a minute on prepaid at 125c interconnect, then Cell C could charge R2.20 per minute at 95c interconnect and compete better without affecting profit margin.
 
If we're paying say R2/min on-network, and R2.10 a minute off-network and interconnect fees come down by 30c/min, does that mean off-network calls will be cheaper than on-network?
 
Gaz{M} said:
As has been pointed out, this will benefit the smaller players and help them attract new customers.

If MTN/V are charging R2.50 a minute on prepaid at 125c interconnect, then Cell C could charge R2.20 per minute at 95c interconnect and compete better without affecting profit margin.
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Not sure that I agree with this statement. If Cell C is currently charging R2.50/minute with the current interconnect fee and they reduce their charge to R2.20/minute when the interconnect fee goes down by 30c then they will decrease their profit margin by 30c. If one assumes that Cell C subscribers calls terminate on average on their own network in the same ratio as their market share of total subscribers and one makes the same assumption for the other networks and once again ignoring the Telkom issue then interconnect revenue and cost would cancel out and any change in the rate would have no effect on profits. Changing the price charged to customers would however have the effect of a reduction in profits equal to the change (all else staying the same).

This is why I am interested to see how these proposed changes are implemented because certainly the expectation is being created in the news reporting that customers should expect a 30c reduction in call costs – I just do not see it happening.:(
 
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