MTN, Vodacom cautiously welcome Icasa MTR policy

Cape Town - Mobile operators have cautiously welcomed the regulator's proposals for termination rates.

Icasa or the Independent Communications Authority of South Africa has adopted the long-run incremental cost plus (LRIC) model as a cost standard to determine the cost of mobile and fixed wholesale voice call termination.

The Mobile Termination Rate (MTR) is what operators pay each other for calls that terminate on rival networks and Icasa has insisted that these should be reduced.

However, the reduction was asymmetric, meaning that MTN and Vodacom would pay more than Cell C and Telkom Mobile in a bid to increase competition.

However, legal action forced Icasa to go back to the drawing board and the regulator made its latest proposal on Monday.


"We've been working closely with Icasa on this. We think it's the right decision. LRIC+ is an aggressive methodology but it does still allow for network investment and is recognised worldwide," Vodacom spokesperson Richard Boorman told Fin24.

There will now be a period where the regulator will determine when and how operators should reduce their MTRs.

"Icasa is better placed to comment on the next steps, but typically it would involve publishing new rates for the industry to comment on," Boorman added.

MTN was also optimistic about the new policy direction.

"MTN believes that it is the most appropriate cost standard to apply to all operators in South Africa. MTN now awaits the results of the cost modelling that has been undertaken by the Authority," said Graham de Vries, general manager of Legal & Regulatory, Regulatory Affairs at MTN.

He indicated that there would be ongoing discussions with the regulator to ensure that the MTR reductions were fair.

"MTN will continue to co-operate and engage constructively with the Authority during its voice call termination market review process."


The process Icasa has followed is what it should have done initially, said industry analyst Steve Ambrose.

"They are doing what should have been done in the first place with a thorough review of the market and calculations based on standards that can allow certainty and accuracy," he said.

He argued that the lawsuit by Vodacom and MTN had illustrated that Icasa had not been able to determine the termination costs.

"MTN and Vodacom raised the valid point that there was not a rigorous process in determining costs when they challenged the new regulations in April, and this new announcement should take care of this," said Ambrose, CEO of Strategy Worx.

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