MTN South Africa CEO Zunaid Bulbulia said that a sudden reduction in mobile termination rates (MTRs) can reduce the company’s incentive to invest heavily in its network in rural areas and continue its subsidizing of mobile phones.
The Independent Communications Authority of South Africa’s (Icasa’s) new draft call termination regulations suggest a glide path for the next three years.
The draft regulations propose a reduction from the current 40c per minute to 20c per minute in March 2014. In March 2015 the rate will be reduced to 15c per minute and in March 2016 it will be 10c per minute.
The draft regulations also suggest significant asymmetry which will be reduced over a 5 year period.
Icasa risking network investment, connecting the poor
Bulbulia said that the success of South Africa’s mobile market was achieved through two main things:
- Large network investments by Vodacom and MTN.
- Handset subsidies to make mobile phones cheaper.
Higher mobile termination rates incentivized mobile operators to get a mobile phone in as many people’s hands as possible, as any received calls would translate into revenue to the operator.
Low-end users do not make many calls, which means that mobile operators only make money through calls received by these users.
Unless this continues, argue MTN and Vodacom, there is no incentive for them to invest in their network in some rural areas as these sites will not be profitable. Subsidizing mobile phones for these users may also disappear if MTRs are too low.
Bulbulia further dismissed the argument that lower MTRs result in lower retail prices. He said that the relationship between MTRs and lower call prices are tenuous at best.
No special treatment for Cell C needed
He also dismissed the need for Cell C to enjoy any asymmetry, where Vodacom and MTN will pay higher fees to terminate calls on Cell C’s network than the other way around.
Bulbulia said that asymmetry means that Vodacom and MTN will basically fund Cell C, and this money will simply flow out of the country to pay Cell C’s international shareholders.
According to Bulbulia Cell C has not invested enough into building a strong network, and the problems which the company is facing are a consequence of its poor network.
He warned that slashing MTRs and introducing bigger asymmetry may result in less money being invested into Vodacom and MTN’s network. This, in turn, can result in poor network quality and even lead to communication blackouts, similar to Eskom’s electricity blackouts.
Bulbulia called for a measured approach when it comes to mobile termination rates, asking for a study on the true cost of termination to guide the regulator’s decisions.