High call rates to Vodacom and MTN cost us a better fibre network – Telkom

Thanks to the high wholesale calling rates Telkom had to pay to Vodacom and MTN, it and its customers lost out on billions of rand that could have been invested in its fibre network.

This is according to Telkom CEO Sipho Maseko, who recently told journalists that since the launch of mobile networks in South Africa in 1994, this regime of wholesale call tariffs was skewed in favour of Vodacom and MTN.

This was understandable in the early days if the intention was to foster competition, but ICASA was “asleep” in the year 2000, he said.

Vodacom and MTN had grown to be the same size as Telkom by that time, and the wholesale calling rates should have reflected that.

R20 billion in 10 years

Maseko said that with all things considered, if ICASA had stepped in earlier and equalised the mobile and fixed call termination rates, Telkom would have had an extra R20 billion over 10 years to invest in its fibre network.

He explained that at one stage Vodacom and MTN charged R1.22 for Telkom to call subscribers on their networks, while Telkom only charged them R0.22.

This resulted in a massive disparity in call termination revenues, peaking in 2008 when Telkom paid out over R5.4 billion to Vodacom and MTN. Telkom received R577 million in return.

Over two decades, Telkom paid R70 billion in call termination rates to Vodacom and MTN, said Maseko.

He said that Telkom is still effectively subsidising Vodacom and MTN, even after ICASA started regulating call termination rates in 2011.

Call termination rate regulations

ICASA started regulating call termination costs in 2011, stating that the “benign regulation” of call termination rates had allowed mobile network operators to expand to cover more than 90% of South Africa’s population.

Vodacom and MTN were obligated to meet this requirement as part of the licensing arrangement with the South African government in the early 1990s.

“This obligation was seen as a crucial requirement in ensuring that citizens had basic access to communications services,” said ICASA.

Maseko’s statement comes after ICASA recently published its latest Call Termination Rates draft.

The draft proposes a number of amendments, including changes to call termination rates.

Maseko stated that if the new rates are implemented, Telkom will be forced to cut a significant number of jobs.

Now read: Vodacom and Telkom discussing new roaming deal – Report

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High call rates to Vodacom and MTN cost us a better fibre network – Telkom