Mobile operator MTN [JSE: MTN] has said it is prepared to defend any prosecution against it relating to the outcomes of the data services market inquiry before the Competition Tribunal.
Chief executive Rob Shuter and Chief Financial Officer Ralph Mupita on Thursday briefed investors in a conference call about the Commission's data services market inquiry.
The Commission last week released its final, over 300-page report on the inquiry, which started in August 2017.
The Commission found that the data services market was concentrated by a duopoly – dominated by firms Vodacom and MTN. This had an adverse effect on lower income households, who were forced to pay high prices for pre-paid data bundles.
Its recommendations to make the environment more conducive for competition included slashing prices between 30% to 50%. The Commission also recommended that the industry regulators enforce rules for mobile operators to provide lifeline data packages – essentially free data bundles daily – with the size of the package to be determined by industry.
The Commission said that failure by mobile operators to enforce recommendations would lead to prosecution.
- READ: MTN, Vodacom to slash data prices or face prosecution; all providers must give free data daily - competition watchdog
At the time, MTN issued a statement indicating that government and regulators were to blame for delaying the release of spectrum required to bring down communication costs.
In the conference call on Thursday, Shuter went onto defend the mobile operator's position. Shuter said the inquiry was a market review and not an investigation. "This means that the findings are non-binding recommendations," Shuter said.
He added that for the Commission to prosecute mobile operators for not making progress on recommendations, the competition watchdog could initiate a complaint or lay a direct referral to the Tribunal.
"Both of those methods would require proof based on evidence, and the Tribunal would have to conclude whether or not there's a case, so that would be an extended process with again opportunities for us to make our case."
Shuter said that the Commission's report and a similar report conducted by the industry regulator regulator – the Independent Communications Authority of South Africa – appeared to have conflicting recommendations.
"So that certainly is creating some complexity for us and we have asked the various public sector bodies to try and seek some internal alignment as well," Shuter said.
Shuter said that MTN had managed to build "world-class networks" in South Africa – at high spend, in the face of constraints linked to spectrum.
"The South African network for MTN has a score in the high 800s and it’s better than our peers in the market, it's the best score across the African continent, it benchmarks well against analysis for major European operators as well.
"We have very high population coverage: 3G in the very high 90s, 4G in the mid-90s, and this has been done with considerably less spectrum than many of our other African markets and certainly less than you see in other parts of the world."
He also said that the industry in SA had "thrived on competition" – contrary to the Commission's findings.
"Whilst we do acknowledge that there is work to be done in pre-paid pricing, we don't agree with the conclusion that this is because of a lack of competition, and we find it odd that someone would conclude that a market is essentially competitive for voice, enterprise and postpaid data and not for pre-paid data," Shuter said.
Don't 'bucket us' with Vodacom
Shuter said the report does not "sufficiently" acknowledge the progress on data price transformation.
"We also believe it is not accurate to bucket MTN and Vodacom together, when in fact MTN is a much smaller operator, generating roughly 50% less revenue, lower returns and actively competing against a very strong number 1 operator, as well as very active and challenging number 3 and number 4 operators."
Shuter added that the mobile operator will continue to engage with the Commission. "We have met with the Commission and we met with the regulator and with a number of the key ministries where we are putting forward our position and reinforcing our arguments made."
"In the event that we do have a fundamental difference of opinion, the legal route available to us would be to defend the position in front of the Competition Tribunal if it is referred by the Competition Commission; and this is a well-regulated process in South Africa."
Mupita told investors that MTN's total service revenue was approximately R18bn for the first half of the year – of this pre-paid data was accounted for by R3.7bn or 21% of total revenue. "At the half year, all the service revenue from pre-paid data bundles of 500MB and lower was approximately R2bn. That amounts to 10% of the total service revenue we recorded at half-year," Mupita added.
30-day bundles (at 500MB and below) also only accounted for a small amount, 1% of revenue, he said.
The Commission also focused quite a lot on what they call continuous access. "Hopefully those numbers give you a sense of dimensioning revenue at risk.," Mupita said.
"Our view is that MTN SA makes a fair return on average capital employed, in a way that cannot be construed as excessive," Mupita said.