Mobile call rates drop in SA: ICASA

The price of prepaid mobile voice calls has dropped 24%, from R1.37 to R1.04 over the past 2 years, as a result of the of Call Termination Rate Regulations  introduced in March 2010.

This is according to the Independent Communications Authority of South Africa (ICASA).

The watchdog says that the decline demonstrates that the benefits of the reduction in termination rates has led to a direct benefit to end-users – and particularly the prepaid market, which houses a majority of mobile phone users.

Termination rates represent the fee that one operator must pay another in order for consumers to contact each other, where a high termination rate keeps off-net retail prices high.

“The actual cost of a call faced by an end-user is not the advertised, or headline tariff, but the combination of free minutes for recharging and other promotions as well as those calls for which the end-user actually pays,” ICASA said.

“The introduction of one-rate packages across networks in 2010, new tariff plans launched in early 2012, as well as the increased number and benefits available to end-users through promotional packages subsequent to the regulation of termination rates, indicate an increasingly competitive retail market and lower retail prices,” ICASA said.

The termination rate is set to fall further from the current R0.56 at peak time, to R0.40 in March 2013.

Cell C CEO Alan Knott-Craig recently told MyBroadband that South Africa’s telecommunications companies have some of the biggest margins in the world, and that the time has come to lower prices and operate with lower margins.

Knott-Craig slashed the price of prepaid and contract voice and data prices within months of taking over as Cell C CEO, and surprisingly, he said that there is room to further reduce prices if needed.

He said that, when he decided on the 99c per minute (on per second billing) flat rate for voice calls, he left enough space to drop prices even further in case his competitors reacted to this new rate.

According to ICASA, the effective tariff is calculated by comparing total revenue to total traffic volumes for a given period of time. The figures below indicate the industry trend in the effective tariff for a mobile prepaid voice call on a six-monthly basis from January 2010 to June 2012.

The trends in the effective tariff for a prepaid mobile voice call

Jun-10 Dec-10 Jun-11 Dec-11 Jun-12
Total prepaid revenue (R millions) 12712 14399 13987 15371 15047
Total prepaid minutes (millions) 10572 14100 14252 16935 16458
Effective Tariff 1.20 1.02 0.98 0.91 0.91
Effective VAT incl. cost to the consumer 1.37 1.16 1.12 1.03 1.04

Source: MTN, Cell C & Vodacom data

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Mobile call rates drop in SA: ICASA