Icasa 'rushed' MTRs, says insider

2014-02-17 14:01
South African mobile operators are eager to switch on a 4G network as soon as are allocated spectrum. (Duncan Alfreds, News24, file)

South African mobile operators are eager to switch on a 4G network as soon as are allocated spectrum. (Duncan Alfreds, News24, file)

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MTN is greedy, says Cell C

2014-02-17 10:44

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. Watch. WATCH

Cape Town - The Mobile Termination Rates (MTRs) announced by the Independent Communications Authority of South Africa (Icasa) was implemented too fast and may distort the mobile market in South Africa, an analyst has said.

Icasa announced on 29 January that MTRs - the rate that mobile operators pay each other for calls that terminate on their networks - would be cut for senior operators MTN and Vodacom, but remain the same for Cell C and Telkom Mobile.

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.

"The result of this would be a net cash flow effect of R1bn in the initial year of the new termination regime from the larger networks to the smaller ones. This is amount that was too significant for the larger networks to ignore," Steven Ambrose, Strategy Worx CEO told News24.

Rushed process

MTN has indicated it plans to sue the regulator over the announcement because the new rules would disrupt the market.

"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.

MTN also objects to the asymmetry where Cell C and Telkom Mobile are allowed to have more leverage in terms of pricing on MTRs, at the expense of Vodacom and itself.

"Additionally, MTN does not support the proposed mobile asymmetrical rates (ie competitive cross-subsidies) and believe these to be unsubstantiated. MTN will also have to scrutinise and consider a number of other due process concerns once the regulation is published."

While Ambrose supports the reduction in MTRs in principle, he argued that the processed was rushed and may not have the intended consequence.

"However, given than asymmetric rates represent a major distortion of the market, any intervention of this nature should be carefully considered, reached only after exhaustive consultation, and very closely monitored with clear objectives and performance metrics in order to make it effective in levelling the competitive playing ire," he said.

Cell C weighed in, saying that the introduction of the new MTR regimen was done with wide consultation.

Discussions

"This is not new; these MTRs have been discussed over and over, and now to bring an urgent application... it's been a lengthy discussion process - months and months of discussions leading up to this decision for the better of all South Africans," Cell C acting CEO Jose Dos Santos told News24.

He said that MTN and Vodacom were part of the discussions and that it was a poor reflection to turn to the courts for relief.

"I'm disappointed - what I can say is that we're respondents to their initial affidavit and we will do what it takes and we will respond," he said.

Ambrose said that mobile rates in SA were still far too high and that and that in the long term, the reductions would result in cheaper rates for consumers.

"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, but will, if properly implemented and managed, result in a more competitive landscape over the next few years, which will be of great benefit to the general public."


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