New termination rates – will you see lower prices?

The Independent Communications Authority of South Africa (Icasa) unveiled new call termination rates on 29 January 2014, which will see mobile termination rates cut from 40c to 10c over the next three years.

The regulations also increases the asymmetry between Vodacom and MTN and the smaller operators – Cell C and Telkom Mobile.

This means that Cell C and Telkom Mobile will get more money to terminate a call on their networks (44c/minute in 2014) than Vodacom and MTN (20c/minute in 2014).

These new mobile termination rates are good news for Cell C and Telkom Mobile, while MTN and Vodacom will find it tougher to compete.

The big question is whether consumers will see lower retail prices. The operators are divided on this.

Telkom: ‘We will pass on reductions to consumers’

Telkom said that the new termination rates will “substantially contribute to reducing the cost of communication and the consumer will be the biggest beneficiary”.

“Telkom will pass on reductions to consumers and will communicate these savings once it has fully assessed the impact of the regulations,” Telkom said.

Department of Communications: ‘We expect reductions in the cost to communicate’

Communications minister Yunus Carrim said that they would like to see these new rates contribute to consumers and business paying less to communicate and benefiting economic growth and job creation over time.

Carrim said that these rates provide for greater competition which they expect to lead to reductions in the cost to communicate.

Cell C: ‘Don’t expect dramatic price reductions’

Cell C’s chief financial officer, Robert Pasley, told Techcentral that “Cell C’s rates are already very competitive, so consumers shouldn’t expect dramatic price reductions”.

Cell C said in an official statement that the new rates will promote and foster a more balanced and competitive mobile industry to the benefit of consumers.

“By increasing its share of the market and putting further pressure on the dominant competitors, Cell C is confident it can drive access to more affordable communications for all South Africans, even those not on its network,” Cell C said.

Vodacom: ‘This is not a victory for consumers’

Vodacom said that this is definitely not a victory for consumers. “This is a subsidy which in effect means that Vodacom will be charged more to call Cell C and Telkom Mobile than the latter will be charged to call Vodacom,” the company said.

“This prejudices Vodacom’s customers, and rewards those who have not invested in their networks at the expense of those who have.”

MTN: No comment on impact on retail prices

MTN said that it does not support the proposed mobile asymmetrical rates, which it calls competitive cross-subsidies.

“The call termination rates announced by ICASA represents a substantial departure from the 2010 call termination regulations which set an important regulatory precedent in relation to matters such as cost-orientation of the rate-setting, a managed glide path, and declining asymmetries,” he said.

“MTN will also have to scrutinise and consider a number of other due process concerns once the regulation is published,” MTN SA CEO Zunaid Bulbulia said.

Neotel: Between a rock and a hard place?

Neotel was asked for comment about the new termination rates, but the company did not respond by the time of publication.

As a fixed line operator the lower mobile termination rates are good news for Neotel. However, Vodacom, which is set to acquire Neotel, has come out in tremendous opposition to the new regulations.

Neotel may therefore struggle to draft a press statement which will welcome the rate cuts without upsetting its possible future master.

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