Vodacom’s R500 million MTR knock

Vodacom is set to lose around R500 million in revenue over the next six months after the new call termination regulations kicked in on Tuesday. This may impact the company’s network investment plans.

South Gauteng High Court judge Haseena Mayat declared the “Second Call Termination Amendment Regulations, 2014” invalid and unlawful on 31 March 2014, and ordered the regulator to review its regulations within 6 months.

Mayat suspended the declaration of invalidity for 6 months, and the new call termination rates therefore kicked in on Tuesday, 1 April 2014.

This means that Vodacom and MTN dropped their mobile termination rates from 40c per minute to 20c per minute, while calls to Cell C and Telkom Mobile carry a 44c per minute termination rate.

Vodacom explains the impact

Vodacom said that over the past five months they have been busy structuring an aggressive investment plan for South Africa that would see capital expenditure rise from roughly R7 billion per year to around R9 billion in the new financial year.

“The idea behind this is that the only sustainable route to a lower cost to communicate is by significantly increasing capacity, thereby enabling higher usage at lower prices,” said Vodacom spokesperson Richard Boorman.

“If the current growth rate is maintained, our data traffic in South Africa will increase tenfold in just over four years. This highlights the importance of continued investment and the need for a consistent, predictable regulatory regime.”

Vodacom previously indicated that the potential full year impact of the new termination rates would be approximately R1 billion. “This should give a rough idea of the impact over the next six months,” said Boorman.

“We are busy reviewing how the financial impact from the rate cuts will translate in terms of our investment plans, and how to minimise the impact on our customers.”

Boorman said that Vodacom is looking to work with the regulator to ensure that a smooth costing process takes place within the allotted six month timeframe.

“We do, in particular, have concerns about the level of asymmetry as it is prejudicial to our customers and amounts to a subsidy for Cell C and Telkom Mobile,” said Boorman.

More on the call termination regulations, 2014

The simple truth: Icasa messed up

Hollow victory for MTN, Vodacom in termination battle

Cell C warns of higher prices, network concerns

What Vodacom, MTN, Cell C, Telkom really mean

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Vodacom’s R500 million MTR knock