Hollow victory for MTN, Vodacom in termination battle

The South Gauteng High Court has ruled that new call termination regulations issued by the Independent Communications Authority of South Africa (Icasa) are “unlawful and invalid”, but the declaration of invalidity has been suspended for 6 months.

This means that the new call termination rates will kick in tomorrow (Tuesday, 1 April 2014) as planned, but Icasa has been given 6 months within which to review them.

Among other things, the current regulations cut mobile termination rates (MTRs) to 20c per minute, while allowing asymmetry of up to 44c per minute.

This means that for the next 6 months Cell C and Telkom Mobile will be allowed to charge Vodacom and MTN significantly more to place to calls to their networks than Vodacom and MTN can charge them.

Icasa regulations unlawful – tweet from Christopher Spillane

Both MTN and Vodacom opposed the new regulations, arguing that Icasa did not follow the correct process to determine the rates.

Initially the new call termination rates were supposed to kick in on 1 March 2014 after being announced on 29 January 2014.

MTN applied for an urgent interdict against the new regulations, resulting in Icasa announcing that it would move the implementation date to 1 May 2014. Later Icasa revised its position and set the commencement date for 1 April 2014 instead.

In a last ditch effort to prevent the interdict from being granted, Icasa also announced that it would relook the rate cuts set out in the regulations for 2015, 2016, and 2017.

Icasa went on to publish urgent amendments to the regulations in the Government Gazette which repealed all the rate cuts but the 20c/44c adjustment for 2014.

Effect of the ruling

In its filing affidavit, MTN said that the new MTRs would cost it almost R143-million in lost aggregated interconnect revenue per month, or R858-million over 6 months.

However, during the course of the court proceedings, an MTN lawyer was quoted as saying that the company could lose R450-million in revenue if the new rates were implemented before a review of the regulations. Such a review could last around 6 months, the lawyer said.

MTN South Africa CEO Zunaid Bulbulia also warned that the rate cuts could lead to “Eskom-type” rolling network blackouts “because we just don’t have the free cash in our business”.

Questioned about this statement from Bulbulia, an MTN media spokesperson told MyBroadband that subscribers need not be concerned about Bulbulia’s warning.

Vodacom also warned that the MTR cuts would impact its revenue, which it said “means less money for Vodacom to invest in network upgrades and bringing overall call costs down”.

Cell C said in its court papers that if the interdict was successful it would have a devastating effect on the company, which includes:

• affecting Cell C’s ability to service its debts;
• negatively impacting Cell C’s ability to improve its customer care services;
• restricting Cell C from investing significantly in its network; and
• continuing to limit the company’s negotiating power.

Without the benefit of increased asymmetry in MTRs, Cell C said that its only real alternative would be to increase its retail rates in line with Vodacom and MTN’s prices.

This ruling therefore means that Cell C and Telkom Mobile have received a temporary reprieve, but depending on what form the revised regulations take this could change in the next 6 months.

Vodacom said that the ruling validates its position to challenge the call termination regulation. The company is studying the ruling and will comment in more detail in due course.

More on South Africa’s termination rate battle

Cell C warns of higher prices, network concerns

There is no disconnect in CEO statements: MTN

MTN CEO vs MTN SA CEO – what is the truth?

What Vodacom, MTN, Cell C, Telkom really mean

Mobile network blackouts warning from MTN