Andy Openshaw, head of Nashua Communications, which recently merged with Nashua Electronic Communications Network and Alan Knott-Craig, Chief Executive at Cell C, are in agreement a substantial reduction is in order for wholesale mobile termination rates next year, after a three year process of rates reduction comes to an end.
A termination rate refers to the wholesale price mobile operators charge for carrying calls between their networks.
According to Openshaw, decreasing the rates will benefit the smaller industry players as well as promote competition since high termination rates mean South Africa’s two largest network providers, Vodacom and MTN, enjoy a strategic advantage over smaller competitors.
“(Operators of) efficient, next generation (Internet protocol) networks can compete at much lower prices that the incumbents,” said Openshaw.
This is due to the fact Vodacom and MTN’s traffic is handled by their own networks, which translates to a smaller proportion of their calls being sent to other operators whereas smaller competitors such as Cell C or 8ta have to route most of their users’ calls to Vodacom and MTN numbers, which generates termination fees.
In May this year, Knott-Craig called for the rate to be dropped to 25c (US$0.03) per minute and said the current rates are “still too high”.
Over the past three years the Independent Communications Authority of South Africa has lowered termination rates. By March next year the rates would have reached 40c (US$0.05) per minute from a previous high of R1.25 (US$0.14) four years ago.
“What happens when the rate drops to 40c in March will be interesting,” Openshaw says and further stated they are starting “to get into the pain zone for the big guys.”
“If we can get it down to 25c, we are getting into a space where competition takes over,” says Openshaw.
