Mobile termination rate cuts could spook investors

The earnings of the biggest mobile operators, Vodacom and MTN could be severely impacted if the Independent Communications Authority of South Africa (Icasa) cuts “mobile termination” costs dramatically.

This is according to a report in the Sunday Times, who noted that on Friday, after the market closed, the regulator issued a proposal to cut the cost of terminating a call from one network to another by 75%, phased in over three years.

A termination rate is the money networks pay to each other for connecting a call.

The current rate is about 40 cents a minute, but Icasa’s draft plan proposes that this should be cut to 10 cents cents a minute within three years, having already reduced from R1.25 a minute in 2010.

Icasa believes there is still “ineffective competition in the market”.

Though consumers, who have already seen call rates drop markedly over the past few years, could benefit, Icasa’s proposals may spook investors in Vodacom and MTN when markets open on Monday, the Sunday paper noted.

Telecom analyst Dobek Pater said termination fees in South Africa were quite high compared with those of other markets.

“If the proposed three-year slide gets pushed through, it will bring the country more in line with the global average,” he said.

The Sunday Times said that insiders believe that new Communications Minister Yunus Carrim has given Icasa the necessary muscle to make changes needed in the industry.

Stakeholders would have 14 working days after the Government Gazette notice appears to submit written comments on the draft regulations. “We expect the final rates to be implemented by March,” said Icasa spokesman Paseka Maleka.

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Mobile termination rate cuts could spook investors