Competition Commission: Cell C takes on MTN, Vodacom

2013-10-09 12:55

South African mobile firm Cell C has lodged a complaint with the Competition Commission, alleging anticompetitive conduct by rivals MTN and Vodacom.

The complaint relates to the pricing of on-network and off-network calls.

Cell C says the way its rivals price these calls has “a dramatic and direct impact on smaller operators’ ability to acquire new customers”.

“The two dominant incumbents discount their effective on-net prices substantially while charging a premium for their customers to call off-net,” said Cell CEO Alan Knott-Craig.

“This amounts to discriminatory pricing and is without doubt anticompetitive when adopted by dominant operators.

“Customers that call off-net are being penalised, often without them realising it,” said Knott-Craig. “With number portability, customers don’t always know if they are calling on- or off-net any more, so they don’t actually know what rate they are paying.”

Vodacom spokesperson Richard Boorman said the mobile operator had “no comment at this stage” on Cell C’s competition complaint.

Zunaid Bulbulia, MTN SA CEO, said: “MTN notes the announcement with interest. We further note the novel arguments raised by Cell C to justify their complaint.

“We deny that there is any anticompetitive conduct as alleged. In fact, MTN is providing good value to its customers within the context of a vigorously competitive market. We see this as another desperate attempt to cry for further subsidies for a failing business. We believe that it is a spurious complaint and we will of course cooperate with the authorities should it be deemed necessary to argue this matter.”

Meanwhile, Knott-Craig is causing a lot of headaches for his former employer, Vodacom.

He lobbied hard for asymmetrical call termination rates, even threatening to take legal action if the regulator, Icasa, did not implement it.

Icasa released its draft regulations on call termination last Friday, which propose asymmetrical call-termination rates.

This is a real boost to smaller mobile players like Cell C and 8ta, who will get to charge MTN and Vodacom a higher rate when calls terminate on their network, compared with when their calls terminate on MTN or Vodacom’s network.

In March 2014, the termination rate will fall from 40c per minute to 20c and Icasa has proposed that, in 2015, the termination rate falls to 15c per minute.

The asymmetrical pricing regime will give smaller players like Cell C and 8ta an extra 19c, so they can charge MTN and Vodacom 39c, while only paying 20c per minute themselves.

“We are fighting for an even playing field to compete on,” said Knott-Craig. “And we are winning, because we absolutely believe in our cause.”

In a statement released on Monday this week, Knott-Craig said: “The market will be a more competitive and balanced one with Icasa’s proposed draft regulations on termination rates as they have currently proposed them.

“It is important to note that this is but the first regulatory step in normalising the South Africa telecommunications space,” he said. “There is much more to come, and the competition is going to be fierce.”

Talking about the competition complaint, Cell C argues that in many mobile markets around the world, regulators are opposed to differential on-net and off-net pricing, and in some instances, dominant mobile-network operators are facing stiff fines for this kind of discriminatory pricing, which locks in customers and prevents switching.

It has also singled out action taken in France, Papua New Guinea and Nigeria against these practices, which it argues supports its complaint.

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