MTN is greedy, says Cell C

2014-02-17 08:50
Cell C acting CEO Jose Dos Santos says that mobile operators should welcome MTR reductions. (Duncan Alfreds, News24)

Cell C acting CEO Jose Dos Santos says that mobile operators should welcome MTR reductions. (Duncan Alfreds, News24)

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Cape Town - The decision by mobile operator MTN to take legal action on the regulator's announcement of Mobile Termination Rates (MTRs) is a poor reflection on the industry, Cell C has said.

Icasa, or the Independent Communications Authority of South Africa announced recently that MTRs in SA would be reduced to allow for more competition in the country.

Specifically, MTRs which is the rate that operators charge each other, would be reduced for the larger operators - Vodacom and MTN - while allowing smaller players like Telkom Mobile and Cell C to be more aggressive on pricing.

Icasa said the costs would be cut to 20c from 40c from 1 March.

The costs will be further cut to 10c by March 2016, while the costs to fixed lines will also fall over the next three years, the regulator said.

Unhappiness

MTN expressed its unhappiness with the new regulations

"Suffice to say that 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," the operator said.

The company has indicated that it will sue Icasa over the issue which gives Cell C and Telkom Mobile more leverage to reduce mobile pricing in SA.

"It's a very sad day for this country. MTRs have been around since we started... For the first time government has really gone out there with the regulator and said: 'Let's create a framework that allows fair competition,'" Cell C acting CEO Jose Dos Santos told News24 about the impending lawsuit.



He said that the reduction in MTRs would facilitate more competition, allowing prices to eventually come down for consumers.

"Competition brings prices down, creates more affordability; creates innovation. MTRs have allowed the third and fourth incumbent to create a level playing field to create more competition, thereby bringing prices down."

An analyst said that the court action would forever change the nature of the relationship between the government and mobile operators in SA.

Consumers 'ripped off'

"Termination rates, despite their emotive connotations, remain one element of the pricing structure that makes up call charges for the networks. While termination rates are already a distortion in a fair and competitive environment, the introduction of asymmetry needs careful consideration to prevent the asymmetric rate becoming another inhibitive distortion to the pricing structure," Steven Ambrose, CEO of Strategy Worx told News24.

He said that consumers in SA are tired of being "ripped off" and the latest courtroom drama would not endear the operators to their customers.

"Consumers will maintain that they have been ripped off for far too long in this environment, and the public outcry in reaction to MTN’s court action will be largely negative for the networks," Ambrose said.

However, he warned that in the short term, reductions in MTRs would result in significant savings for mobile consumers.

"Having said that, Strategy Worx has long maintained that this latest round of MTR cuts will not result in massive benefits for the consumer in the short term because they won't immediately change the competitive landscape between the networks," he added.

Dos Santos said that Cell C was driven to reduce pricing and cited the 15c per megabyte data rates as well the 2012 introduction of a 99c flat call rate on the network.

He said that mobile operators should be focused on the long term development of the country rather than short term profit.

"When I say it's a sad day for South Africa, you have a corporate citizen who actually puts their greed and profitability first before developing the economy of the country."

Watch our News24 video interview with Cell C acting CEO Jose Dos Santos on how the MTR fight will affect your pocket.




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