Cell C wants even playing field
Consumers can be forgiven for being totally confused when it comes to choosing the cheapest cellphone call package.
With the complicated range of cellular packages, it is difficult to determine how much you are spending at what times.
Things have not been made easier because all three major cellular service providers — Cell C, MTN and Vodacom — are being very cagey about any adjustments to their call rates that may or may not be made this year.
This could be because of an impending Competition Tribunal trial that was filed last year by the struggling Cell C.
Last year the Competition Commission referred a complaint, to the Competition Tribunal, about the excessive interconnection charges, which were increased by over 500% in 2002, shortly before Cell C entered the market.
The current interconnect charge is R1.25 across different networks. Telkom and Cell C are nett payers of interconnection fees, while Vodacom and MTN are nett receivers of fees.
The reason for this is that South Africans are using less fixed-line telephony than mobile. Vodacom has a 50% market share of the local cellular phone market compared with MTN’s 36% and Cell C’s newly announced all-time high of 14%.
This week Jeffrey Hedberg, Cell C’s chief executive, announced the company’s maiden year of profitability.
However, he cautioned that customers would not receive price decreases until Vodacom and MTN decreased their interconnection charges.
Hedberg said the high interconnection charges were a joint strategy by the market leaders to squeeze Cell C out of market.
The tribunal has not yet set a date for the trial. Jane Sussens, communications adviser to the tribunal, said: “ It’s a very complicated process and it could be some time before (a prosecution date) is set, as filings still need to be completed by the various parties.”
The case could cost Vodacom and MTN millions in penalties and bring cellphone rates down as interconnection charges between networks are slashed.
Khulekani Dlamini, Renaissance Fund Managers director and ICT analyst, said: “We have the highest interconnection charges in the world, and that translates into higher cellular rates.
“The government needs to step up to its mandate and ensure that basic telephony (both fixed and mobile) prices are decreased. I find it difficult to understand why it is so difficult to complete,” said Dlamini.
MTN and Vodacom will most likely argue that their capital base is high, which justifies the high prices charged to users of other service providers.
Ntombizodwa Mhangwani, MTN communications manager, said: “The major cost factors (that contribute to price structures) are the building of a network and the costs of infrastructure, especially for new technologies such as 3G.
“However, MTN has not adjusted post- paid prices since 2005, and has adjusted prepaid rates down on an annual basis since 2005,” she added.
Spokesman for Vodacom, Dot Field, said the company’s continued investment in increasing capacity and maintenance contributed to the overall rates.
Cell C said it was able to save on infrastructure costs on 3G, which the other providers had implemented at great cost.
In light of this huge expenditure (up to R2-billion to roll out nationally), MTN and Vodacom are unlikely to simply roll over and relinquish the profit margins they gain from interconnection charges.
In the meantime, South African cellphone users will continue to pay higher prices than most other countries in the world.
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