Voice rates: who cut prices and who didn’t?

Wholesale termination rates (aka interconnect rates) were cut today (1 March 2012), raising the question of which telecoms companies will cut prices to consumers on the back of the lower interconnect rates.

Mobile termination rates were reduced today (1 March 2012) as follows:

• Peak mobile termination rate down from R0.73 to R0.56 per minute
• Off-peak mobile termination rate down from R0.65 to R0.52 per minute

Fixed line termination rates were reduced as follows:

• Peak fixed termination rate within ON area code down from R0.20 to R0.15 per minute
• Peak fixed termination rate between ON area code down from R0.28 to R0.25 per minute

There have been concerns from consumers and politicians that the lower interconnect rates will not result in lower retail prices to consumers, and these concerns seems to be justified.

To date there have not been significant price reductions in voice calls from the mobile operators, and Telkom is also not passing these savings on to consumers in full (as was the case with the first interconnect price cut).

The following table lists which companies will (or already have) cut voice call rates because of the lower interconnect rates, and which companies did not (or preferred not to comment on the issue).

Vodacom spokesperson Richard Boorman explained that the cellular operators are actually losing money because of the lower mobile termination rates and that they will therefore not reduce prices based on interconnect rate cuts.

“No money is created or destroyed in this process and there is no net charge to the consumer, so reducing mobile termination rates doesn’t create a net saving that can be passed on to the customer,” said Boorman.

Virgin Mobile spokesperson Jonathan Newman said that “in anticipation of the reducing interconnect regime, Virgin Mobile already offers the lowest call rates and best value deals in the market. Consequently we do not have immediate plans to drop our rates further at this time,” said Newman.

Fixed line providers like Telkom and Neotel are however saving money through lower mobile termination rates, and while Neotel is passing these savings to their subscribers Telkom has not followed suit.

Neotel now offers a peak-time call charge to all mobile operators of R1.05 per minute and an off-peak rate of R0.94 per minute. Neotel to Telkom national rates were reduced by 10%.

Telkom said that changes to its tariffs are subject to a filing process undertaken with ICASA and annual retail tariff adjustments are usually effective on 1 August. “Telkom will make announcements regarding any adjustments in alignment with the requirements of this process,” said Telkom.

“MTN has always maintained that the decrease in interconnection fees does not have a direct impact on retail rates. Retail rates are set as a result of competitive activity in the mobile industry, in an endeavour to meet customer’s needs,” said Robert Madzonga, Chief Corporate Services Officer, MTN SA.

“In the past, and as recently as last year, MTN has in fact consistently reduced its call rates. Furthermore, MTN continues to offer innovative competitive propositions that provide its customers with reduced rates. All of this activity has been in the context of normal competitive activity and not as a result of a reduction in interconnection rates,” said Madzonga.

Cell C‘s chief commercial officer Björn Flormann says that tariff portfolios are planned long-term and Cell C has launched the 99c on-net rate which already incorporated the change of termination rates.

“The 99c rate, together with the off-net price of R1.50 is one of the best offers currently in the market.  Of course we are constantly looking at the market and will continue to offer value for money products and services,” said Flormann.

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