ICASA publishes interconnection rates for mobile operators; Cell C and 8ta permitted to apply for higher rates

1 Nov 2010

The Independent Communications Authority of South Africa (ICASA) has published interconnection rates for the country’s two largest mobile operators by subscribers, Vodacom and MTN, as well as calls to Telkom South Africa’s fixed line network. In an unexpected move, the new interconnection rates leave the door open for South Africa’s two smallest mobile operators, Cell C and 8ta, to apply to charge higher rates than their more established competitors. Cell C has pushed for higher call termination rates since its inception in 2001, arguing that its weak market position necessitates asymmetrical interconnection rates. Cell C reportedly seeks a rate of ZAR0.89 (USD0.13), whilst 8ta, Telkom South Africa’s brand new mobile unit, has requested an interconnection rate of ZAR0.93. ICASA confirmed that it has referred the issue to its Complaints and Compliance Commission (CCC), and the outcome of the dispute is still pending. It is unclear whether MTN and Vodacom will contest the preferential rates being requested by their smaller competitors.

In March 2011 mobile termination rates will drop to ZAR0.73 during peak times and ZAR0.65 during off-peak times. The following year the rates will drop to ZAR0.56 and ZAR0.52 respectively. Further, by March 2013, wholesale mobile termination rates will drop to ZAR0.40, regardless of the time the call is made. Fixed line rates, which are dependent on whether the calls are local or nationwide, will drop to ZAR0.20 during peak times and ZAR0.12 during non-peak for local calls next March, whilst nationwide termination rates will drop to ZAR0.28 during peak times, and ZAR0.19 during off-peak times. In 2012, the termination of local calls will drop to ZAR0.15 and ZAR0.12 respectively, while national calls will drop to ZAR0.25 and ZAR0.19. At the end of the glide path period (March 2013), termination rates for local calls will drop to ZAR0.12 regardless of the time, with national rates dropping accordingly, to ZAR0.19.

ICASA councillor Thabo Makhakhe admitted that different rules apply for firms with less than 25% market share, which face higher costs than the dominant players. Makhakhe said that the previous interconnection costs were necessary when there were only two operators in the market, commenting that this ‘benign regulatory environment is no longer suited to the country’s need for a more competitive market for the provision of information and communications technology services’. It is thought that Cell C and 8ta will both be permitted interconnection rates that are 20% higher than Vodacom and MTN in the first year, 15% higher between 2012 and 2013, and 10% higher from March 2013.

Vodacom South Africa Managing Director Shameel Joosub commented: ‘The agreed glide path gives us time to adjust our business model in order to accommodate the significant further revenue reduction that will result from the changes announced today. It’s important to emphasise that today’s announcement does not produce savings for Vodacom to pass on to customers. It does, however, foster competition, which is in turn likely to lead to lower call charges’.