MTN comes out fighting: We're not greedy

2014-02-21 08:00
MTN has stated its case that MTR cuts are being introduced with little justification. (Duncan Alfreds, News24)

MTN has stated its case that MTR cuts are being introduced with little justification. (Duncan Alfreds, News24)

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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 - Mobile operator MTN has come out fighting accusations that it is greedy with respect to its court challenge to the regulator's decision on Mobile Termination Rates (MTRs).

The Independent Communications Authority of South Africa's (Icasa) which oversees the telecoms industry in South Africa ruled that MTRs - or the rate that operators pay each other for calls that terminate on their networks - had to be reduced.

However, the reductions are asymmetrical in that it gives junior operators Cell C and Telkom Mobile more leverage to be aggressive on pricing.

MTN said that it had invested large amounts of money into developing a mobile network to cover the country. It argued that the new rules were short-sighted and may threaten the entire mobile industry in SA.

"Unfortunately, MTN South Africa is faced with a sustained level of regulatory attack that appears to be more about levelling out past successes than securing South Africa's economic future," said Zunaid Bulbulia, CEO of MTN South Africa.


The company has indicated its intention to sue over the rates that dictate a cut to 20c from 40c from 1 March, but only for MTN and Vodacom.

Though the amounts seem small, they add up to a significant amount of money being at stake.

"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.

In addition, 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.

"What MTN cannot accept is for this cost based principled approach to be reversed for selected players, increasing MTN's subscribers' costs, as huge dispensations are handed over on the basis of regulatory experiments or sympathies, however well-intentioned they may appear to be," said Bulbulia.

While MTN has been at the receiving end of a campaign from Cell C which stands to benefit from the new rules, it may find its view has some sympathy with international organisation the GSM Association.

"Governments and those within governments who have an interest in positioning themselves between the mobile sector and the economy - we will see more of this kind of discussion; in some countries there's a kind of nostalgia for the days of telecom monopolies," Peter Lyons, director of Public Policy Africa Middle East at the GSM Association told News24 about telecom control in Africa.


Bulbulia said that the new rules set a dangerous precedent for the country.

"The less obvious risk with these proposals is that they create a dangerous precedent. Would MTN be allowed to claim subsidies if it made disastrous investment decisions and its market share suddenly crashed below some magical threshold?" he said, barely containing sarcasm.

The operator supports the reduction in MTRs, but questions the implementation and methodology, Bulbulia explained.

"MTN supports a continued decline in mobile termination rates, but this decline must be driven by a process that ensures MTRs are reflective of the costs incurred by all players in the market."

- Follow Duncan on Twitter
Read more on:    mtn  |  gsma  |  cell c  |  icasa  |  mobile

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