Termination rate cuts: who will drop prices?

Vodacom, MTN, and Cell C have no intention to reduce their voice call rates in the wake of the last round of termination rate cuts required by the Independent Communications Authority of South Africa (ICASA).

The new rates kick in on 1 March 2013 and among other things, the peak and off-peak costs of terminating a call on a mobile network will be made equal, and reduced to 40c.

Vodacom

Questioned about the third and final set of cuts specified in the current glide path, Vodacom explained that mobile termination rates (MTRs) are a source of net revenue for them.

This means that a reduction in the rate has a negative effect for Vodacom, a spokesperson told MyBroadband.

“In our last financial year, the cuts introduced in that period reduced pre-tax profits by almost R400 million,” Vodacom said.

“In other words, there won’t be savings from the latest cuts to pass on to our customers.”

MTN

MTN said that they would like to place on record that they will implement the rate cut, but said that interconnection rates are not directly linked to lower retail voice rates “despite the unrelenting claims to this effect that is being played out in the media.”

Robert Madzonga, chief corporate services officer at MTN SA said that MTN has dramatically decreased rates since the MTR regulations were implemented in March 2011.

“Not only have call durations increased but the capability of customers spending more time on calls for the same spend has increased,” Madzonga said.

Cell C

Cell C said that its 99c/minute call rate structure was implemented in anticipation of the 40c termination rates.

“Further reductions in our retail tariffs will not be made as a direct consequence of the 1 March 2013 MTR decline,” Cell C said.

The mobile network operator went on to say that the further narrowing of the MTR asymmetry offered to smaller operators on 1 March 2013 significantly harms Cell C and reduces the prospect of us making further reductions in our retail tariffs.

According to the regulations, asymmetry of 10% is allowed, meaning Cell C can ask larger operators 44c to terminate calls on its network.

Neotel

Of all the networks queried, only Neotel confirmed that it will be dropping call rates.

Neotel said that the new rates include a reduction in the rate for calls to mobile phones to 97c per minute during business hours, and 90c per minute after hours, as well as reductions in the rates for calls to Telkom.

“As we have done every year, we continue to demonstrate our commitment to bringing cost effective communications to the market, with an immediate reduction in our prices following the regulated reduction in termination rates,” Neotel said.

The table below summarises the feedback we’ve received from the various operators:

8ta and Telkom did not comment by the time of publication on whether they plan to cut termination rates.

However, Telkom typically only adjusts its rates in August, 6 months after the termination rate cut takes effect.

* Update: Telkom has provided comment confirming that they will relook their rates by August 2013.

Since the inception of the mobile termination rates drop, Telkom has voluntarily passed the benefit to consumers by reducing its customers’ call rates to mobile operators with approximately R2bn and has positively contributed to bringing down the cost of communication in real terms for consumers. In terms of further reductions, Telkom will consider the matter as part of our annual Retail Tariff Filing in August 2013.

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