Vodacom and MTN deny collusion over prices; operators debate MTR

16 Oct 2009

South African mobile operators Vodacom and MTN have denied allegations of anti-competitive activities, following reports that the Competition Commission (ComCom) is investigating three claims of possible collusion over prices in the industry. Nandi Mokoena, ComCom’s manager of strategy and stakeholder relations, told news agency Reuters: ‘We have got three cases that we are investigating in the mobile phone industry, all dealing with the same issue. The allegations are that cellular phone companies have agreed on the rates they charge.’ Mokoena refused to speculate on when the investigation would conclude, but did say that both mobile operators involved had been notified by ComCom. The complaints relate specifically to accusations that Vodacom colluded with rival MTN to hike interconnection fees months before Cell C began operating in an attempt to prevent the then-new player from establishing itself as a credible rival to the duopoly. Both MTN and Vodacom have publicly denied the allegations, MTN said in a statement: ‘ComCom has investigated three complaints against mobile operators, including MTN, relating to interconnection… MTN denies there is any merit in these complaints.’ Vodacom CEO Pieter Uys said: ‘There are those who say MTN and Vodacom got together, in smoke-filled rooms and on the golf courses. But that is definitely not what happened. What happened was, initially, when we did not know the market size and what the costs were going to be, we had experts from Australia come over to advise Telkom, Vodacom and MTN how the interconnect regime should be structured. It had nothing to do with Cell C coming in.’

Meanwhile the government has ordered a cut in mobile termination rates to be implemented by the end of November, saying it had been forced to act because the communications regulator would not do so. The committee has proposed that rates should be cut to ZAR0.60 (USD0.08) per minute during peak times and then by a further ZAR0.15 annually until 2012. Operators currently charge each other on average ZAR1.25 per minute during peak times. However, carriers have opposed the cut, describing it as ‘drastic’ and ‘below cost.’ Cell C CEO Lars Reichelt said that the ZAR0.60 proposal was ‘too strong and not rooted in reality.’ He estimated the off-peak termination rate for the major players to be ZAR0.77, and proposed a flat ZAR0.75 termination rate from the start of the new year for Vodacom and MTN, and ZAR0.65 for Cell C. ‘We believe this proposal can potentially gain support from other players,’ Reichelt added, however its rivals have not supported the idea of an asymmetrical system.