How Vodacom and MTN crushed Cell C before it launched

Vodacom and MTN ensured Cell C could not compete against them when it launched in 2001 by drastically increasing mobile termination rates.
Fast-forward 23 years, and Cell C is once again fighting for fair termination rate regulations to assist smaller operators.
To understand this battle, one has to go back to the turn of the century, when Cell C was preparing to compete against Vodacom and MTN.
Between 1994 and 1999, Vodacom and MTN charged each other 10c per minute for off-peak calls and 20c per minute for on-peak calls to terminate calls on their networks.
However, with competition looming, they hatched a new plan to make it more difficult for newcomers to compete.
Vodacom and MTN met in London in 1999 to discuss how much they would charge each other — and other networks — for connecting calls to their subscribers.
Between 1999 and Cell C’s launch in 2001, Vodacom and MTN increased their call termination rates by over 500% for off-peak calls and over 1,100% for on-peak calls.
After Cell C launched, it had very few subscribers, so most of its subscribers called Vodacom and MTN numbers.
As a result, Cell C had to pay over a substantial chunk of its voice revenue to Vodacom and MTN.
Vodacom and MTN, with millions of subscribers, terminated many calls on their own networks without incurring termination rates.
This made them net beneficiaries of termination rate fees and could launch attractive on-net call specials for their subscribers.
Cell C previously explained that this placed it at a massive disadvantage from the outset. It was forced to fight with its hands behind its back.
The Independent Communications Authority of South Africa (Icasa) finally stepped in to regulate call termination rates in 2010.
It included asymmetric rates for smaller networks, like Cell C, allowing them to charge a higher rate for terminating calls on their networks than Vodacom and MTN.
However, it was too late. Cell C was saddled with billions of debt and was going bankrupt. It ultimately needed a bailout from Blue Label Telecoms to continue operating.
The chart below shows the rapid increase in mobile termination rates between the plan to license two new mobile operators and Cell C’s launch.
New fight around mobile termination rates
Cell C is once again fighting for call termination rate fairness after Icasa published a draft amendment to the call termination regulations for public comment.
Icasa has proposed substantial reductions in call termination rates and the abolition of asymmetric rates for smaller players like Telkom and Cell C.
New entrants into the voice services market will continue to qualify for asymmetry for three years.
The proposed regulations will see all operators charging 4c to terminate a mobile call on their network and 1c to terminate a fixed-line call from 1 July 2025.
Cell C argues that doing away with asymmetric call termination rates by 1 July 2025 will hurt the industry.
It said South Africa needs a telecommunications industry characterised by robust competition, transparency, and consumer choice.
It warned that the proposed reduction in interconnect fees, particularly the removal of asymmetry, raises concerns about market dynamics and consumer welfare.
Cell C argued it was important to maintain pro-competitive regulations to ensure a level playing field and drive innovation to benefit consumers.
It proposed a 3-year glide path to safeguard the interests of smaller operators, promote fair competition, and uphold consumer choice and affordability.
It said this phased termination rate adjustment period would allow smaller operators to adapt financially and strategically.
The table below summarises the mobile and fixed call termination rates Icasa is proposing.
Termination to a mobile device | |||
---|---|---|---|
Operator type | Current | From 1 July 2024 | From 1 July 2025 |
Large operators | R0.09/min | R0.07/min | R0.04/min |
Small operators | R0.13/min | R0.09/min | R0.04/min |
New entrants | — | R0.07/min | R0.07/min |
Termination to a fixed device | |||
---|---|---|---|
Operator type | Current | From 1 July 2024 | From 1 July 2025 |
Large operators | R0.06/min | R0.04/min | R0.01/min |
Small operators | R0.06/min | R0.04/min | R0.01/min |
New entrants | — | R0.04/min | R0.01/min |