The Independent Communications Authority of South Africa (Icasa) has decided on the future of both mobile and fixed termination rates for the next three years, based on a review of industry conditions.
Currently, termination to a mobile location is R0,40, dropping to R0,20 on 1 March 2014, R0,15 in 2015 and R0,10 in 2016. Termination to a fixed location will be reduced to between R0,12 and R0,19.
In 2010 the authority determined that ineffective competition existed in the provision of call termination because of, among others, inefficient pricing. At that time, it imposed cost-oriented pricing on Vodacom and MTN for mobile termination and Telkom for fixed termination.
Icasa states that the market remains ineffective with extremely high levels of concentration, and has published revised termination rates that apply to Vodacom and MTN for mobile termination and Telkom for fixed termination.
It states that the need for further asymmetry is based on traffic imbalances reflecting economies of scale; a need to promote investment and encourage competition; and to foster SMMEs.
Alan Knott-Craig, CEO of Cell C, comments on the new rates: “It is really encouraging to see ICASA work quickly and efficiently, favouring neither friend nor foe.
“Whilst in actual terms (cents) the asymmetry is lower than what was hoped for, ICASA has been smart in providing asymmetry over a longer period with a relatively gentle glide path. On the other hand it has blasted the way open by drastically reducing the single largest cost factor in prices, namely the MTR which both Vodacom and MTN enjoy, noting that today these two operators control more than 90% of the mobile market revenue. They have got that spot on.
“Of all the players Telkom (fixed line) wins hands down. And I do not begrudge them that. They have played a major role in establishing the current healthy mobile industry,” he says.
“Whilst my first instinct is to challenge ICASA, they have had to tread a fine line between under-reacting and over-reacting, and they have cleverly done what they needed to do to make it possible for the telecommunications market in South Africa to gain a semblance of normality.
“I would have wished for a better outcome for Cell C, but individual interests aside, 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.”
Knott-Craig believes that this is a first regulatory step towards normalising the South Africa telecommunications space.
“There is much more to come, and the competition is going to be fierce.
“Cell C needs more market share, and we will only gain that through aggressive pricing and good network quality,” he says. “Price is the easy bit, and we are still on track for adding masses of capacity and drastically improving network quality by November this year to cater for the dramatic increase in traffic.”