ICASA interconnect Regulations: What the operators say

This is bad news for many of the small operators: ICASA has not considered what this will lead to "Less Competition"

1. Many operators used the inbound income earned from the Interconnect to subsidies the cost of the outbound call, equipment fees etc, now the consumer will end up paying for this, or most likely switching back to Telkom. Examples of providers who will suffer, Vox Telecom, uses the rebate to pay dealers for there distribution of the consumer offering. As well as there 087 calling card companies, ECN used this income to pay for the equipment and access methods so they could be more competitive.

2. The Least Cost routing companies are completely stuffed, with them all relying on the Connection Bonus paid to them each time they renew a contract, which in effect created an margin which they cannot carry on providing a service without, considering the Interconnect price is way below there cost of a SIM minute, they are in trouble. Orion, TeleMasters and Huge all need to re-look at there business models. There is an additional problem. there contracts are for 2 years.
 
I do not care about the phone companies charging each other the lower that is the lower the call cost should be. if you only paying 40 cents a min how can the charge me to make a call R3,00 charge 80 cents per min i will call more and when i make a on net call it is not costing the the interconnect fee,
 
The_Interconnect_Guru said:
This is bad news for many of the small operators: ICASA has not considered what this will lead to "Less Competition"

1. Many operators used the inbound income earned from the Interconnect to subsidies the cost of the outbound call, equipment fees etc, now the consumer will end up paying for this, or most likely switching back to Telkom. Examples of providers who will suffer, Vox Telecom, uses the rebate to pay dealers for there distribution of the consumer offering. As well as there 087 calling card companies, ECN used this income to pay for the equipment and access methods so they could be more competitive.

2. The Least Cost routing companies are completely stuffed, with them all relying on the Connection Bonus paid to them each time they renew a contract, which in effect created an margin which they cannot carry on providing a service without, considering the Interconnect price is way below there cost of a SIM minute, they are in trouble. Orion, TeleMasters and Huge all need to re-look at there business models. There is an additional problem. there contracts are for 2 years.
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I predicted this 18 months ago...
 
The question is can these companies remodel there businesses in time, and the bigger question, is there a business model that will work. ICASA has effectively killed the competition. ECN and Vox Telecom are great companies, With a useless regulator like ICASA, who dont understand the Telecommunications Market I hope the find a way through these troubled times.
 
zamicro said:
I think this is great news. For the LCR market I am sorry about your problems, but the public must come first.
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Agree, these companies make their money off kickbacks paid for by the consumer, they represented yet another middleman keeping the telecoms market more costly than it needs to be.

These changes will force prices down, at the expense of lower subsidies, lower rebates on incoming minutes and such like. Some of this money will go elsewhere into the economy instead of into the grossly over-weighted telecomms guerella.

Is this good or not, I don't know, perhaps it's the end of the period of continuous cellular network upgrades, perhaps no more free phones....

D
 
I just think that Cell C should have also been on the list. Telkom, MTN and VC are there. I think MTN is correct in saying they have had 10 years. That is a long window and they seem to have made good ground over the last 2 years. I just wonder if the new Telkom mobile service is also limited, I would suppose so as it is Telkom. So who would then be able to justify a higher rate ?
 
MT Rates still to high. We will never get Google Voice :(
How about R0.02-R0.05/min MT rates, billed per second?
These greedy telcos make me sick.
 
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Haha.. These incumbent operators are so funny :D WTF are they on about? If the call termination rate was just dropped today then I don't think they would even lose all that much profit. Surely all these termination rates between networks must balance out to some degree... If you ask me the termination rates and peering charges are basically used as a stick handle competition and to keep call costs artificially high. I mean we all saw how (true to form -_- ) 8ta tried to schnaai all the other players on mobile to land line rates. I'm sorry that's just not cricket.

It's funny when the more clients you have the more your peer companies have to pay you. There's just something wrong in that equation...
 
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The Trutherizer said:
Haha.. These incumbent operators are so funny :D WTF are they on about? If the call termination rate was just dropped today then I don't think they would even lose all that much profit. Surely all these termination rates between networks must balance out to some degree... If you ask me the termination rates and peering charges are basically used as a stick handle competition and to keep call costs artificially high. I mean we all saw how (true to form -_- ) 8ta tried to schnaai all the other players on mobile to land line rates. I'm sorry that's just not cricket.

It's funny when the more clients you have the more your peer companies have to pay you. There's just something wrong in that equation...
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VC and MTN make much of their interconnect profit (which is substantial) on the massive price differential between fixed and mobile termination rates. That differential comes down and they make less profit. Why do you think ICASA are so excited now about cutting these interconnect rates? Because Telkom are the ones making a loss on interconnect fees - and after they sold their share in VC it no longer balanced out...

Of course, nobody should be making any real profit off interconnect rates - so Vodacom moaning about how they're going to have to cut costs elsewhere to see if they can pass on these savings to consumers is a load of bollocks. They just want to protect their profit margin on something they shouldn't be profiting on in the first place.
 
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I would just like to say this. Infrastructure and capacity is not so expensive that you should deny South Africans world class telephone call costs. The cheaper you make telephone calls the more people will call each other. You cannot possibly lose if you are an existing operator. Except if you are not willing to stay up to date.
 
It was reported earlier in the year that Vodacom makes just over R8,5 billion rand from interconnect fees, while MTN is a little lower, I think it was around R6.5 billion but may have been closer to R8 billion. I should look this up rather than rely on memory. The problem for them is that their business model and their business as such is so inefficient they will not turn as large a profit as they do now. In order to reduce costs they should remove a number of their top management. The top three earn close to R10 million each, there is R30 million we can have back.
Their main income is derived from telecommunications and not sport management. Even if they are writing this amount off against tax, and claiming it back, why is that money not being passed back to the subscribers in the form of lower prices?
The cost of cellphone contracts increased a number of years ago, this was when they decided to force subscribers to pay for itemised billing and caller id. These are features that we should also not have to pay for but we fork out atleast R30 a month for this nonsense. This is also extra income that comes to them at little or no cost.
SMSs cost 80c to send 160 characters from one phone to another. How come this is more expensive than the R2 per mb (1,000,000) characters we get to download when using the internet on our phones? It is another source of easy revenue for these people. Over the week containing Christmas and New Years, MTN claims they make around R40 million from SMSs alone.
In Sweden, you can get an iPhone 3GS and unlimited voice calls for 100Kr, about R100, a month. The difference is that overseas companies are managed correctly and run efficiently.
The cellphone companies in South Africa have more than enough money flowing in, most of it gathered from overpriced services, that they should still remain very profitable. I don't see why we need to pay for their incompetence, unfortunately we don't have much choice in the matter.
 
Gmac270 said:
It was reported earlier in the year that Vodacom makes just over R8,5 billion rand from interconnect fees, while MTN is a little lower, I think it was around R6.5 billion but may have been closer to R8 billion. I should look this up rather than rely on memory. The problem for them is that their business model and their business as such is so inefficient they will not turn as large a profit as they do now. In order to reduce costs they should remove a number of their top management. The top three earn close to R10 million each, there is R30 million we can have back.
Their main income is derived from telecommunications and not sport management. Even if they are writing this amount off against tax, and claiming it back, why is that money not being passed back to the subscribers in the form of lower prices?
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Vodacom spends R1.7bn per annum on marketing and advertising alone. For every 10% reduction in peak mobile termination rates, Vodacom will see an estimated R200m loss in annualised earnings before interest, taxes, depreciation and amortization. In the 2009 financial year, Vodacom's South Africa business generated R8.6bn in revenue from interconnection. This amounts to 18.3% of it's total revenue. It paid Telkom R462m in interconnect fees, while receiving R2.96bn in interconnection payments from the fixed-line operator. In the year to March 31, Vodacom's total net interconnect revenue decreased by 14.7% (R1.75bn from R2.05bn).
 
Ozymandias said:
Vodacom spends R1.7bn per annum on marketing and advertising alone. For every 10% reduction in peak mobile termination rates, Vodacom will see an estimated R200m loss in annualised earnings before interest, taxes, depreciation and amortization. In the 2009 financial year, Vodacom's South Africa business generated R8.6bn in revenue from interconnection. This amounts to 18.3% of it's total revenue. It paid Telkom R462m in interconnect fees, while receiving R2.96bn in interconnection payments from the fixed-line operator. In the year to March 31, Vodacom's total net interconnect revenue decreased by 14.7% (R1.75bn from R2.05bn).
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Quite true. VC and MTN will lose money with interconnect rate cuts. However it is a revenue stream that should not be so significant in the first place. I understand the desire to protect their bottom line, but telecoms operators are making way more than they should. They have to pass on the full extent of these rate cuts to consumers - their bottom line is of no concern to us. Of course I'm sure they will delay passing on the cuts for as long as possible anyway, making pathetic excuses about having to cut other costs to keep their high profits (frankly that statement worries me greatly - what the hell costs are they cutting? I sincerely hope that it's advertising and sponsorship and not something important).
 
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