Cellular interconnect rate cuts
The cellular operators agreed with the government last year to cut the fee to 89c a minute from March. This will save fixed-line operator Telkom R1 billion in annual costs while Vodacom, Cell C and MTN will together lose R1bn revenue.
The slashing of fees came amid fierce criticism of major networks by the government and smaller operators as these fees are passed on to consumers, making South Africa’s cellular services among the most expensive in the world.
Cellular operators Vodacom, MTN and Cell C pay each other a peak interconnection fee of R1.25 a minute to terminate calls from each other’s networks. Telkom pays the same tariff, while it is paid only 29c to take cellular calls.
Cell C said this week the trio, through bilateral discussions, had agreed on voluntary cuts over three years. This deal has been lodged with the Independent Communications Authority of SA for approval.
The peak rate is expected to reduce further to 85c next year and 80c by March 2012.
Vodacom said the cuts would reduce its interconnection revenues and might result in increased competition.
It said it was “seeking to lower its cost structures to mitigate the downward pressure on revenue in programmes such as the investment in new technologies, which are more efficient on spectrum, electricity and other operating costs”.
Asked how it would make up for the expected losses, Cell C said by increasing affordability of mobile telephony, more people would use cellphones and existing customers would make more calls. “It is a matter of price elasticity.”
It added that its subscribers were already benefiting from reduced tariffs. At the end of last year, and in anticipation of the March reduction, Cell C introduced a R1.50 flat rate across all of its prepaid packages.
The smallest of the big three operators said: “Consumers have responded very well as they no longer have to worry whether the call is made during peak or off-peak times. They can just pick up the phone and call at a rate that is lower than most post-paid rates.”
MTN South Africa did not respond to questions.
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