The new mobile termination rates (MTRs) implemented yesterday by the Independent Communications Authority of South Africa (ICASA) will have a full-year impact of approximately ZAR1 billion (US$94 million) on the country’s leading operator Vodacom, meaning the company will have to reconsider the extent of investment it makes.
HumanIPO reported earlier this week MTR regulations published by the Independent Communications Authority of South Africa (ICASA) in January were declared “invalid and unlawful” by the High Court of South Gauteng, the court allowing legal challenges by Vodacom and MTN which claimed the regulations were not formulated in compliance with statutory procedural requirements.
However, the court exercised its discretion in the public interest, allowing the regulations to take effect as of yesterday for a period of six months, during which time the regulator must conduct a proper review with a view to formulating new regulations.
Vodacom spokesperson Richard Boorman said the operator faced a large financial impact from the cuts, which could threaten investment made by the company in necessary infrastructure.
“We are busy reviewing how the financial impact from the rate cuts will translate in terms of our investment plans, and how to minimise the impact on our customers,” Boorman said.
“If the current growth rate is maintained, our data traffic in South Africa will increase tenfold in just over four years. This highlights the importance of continued investment and the need for a consistent, predictable regulatory regime.
“We’d previously indicated that the potential full year impact of the new termination rates would be approximately ZAR1 billion. This should give a rough idea of the impact over the next six months.”
Boorman said the only way to lower the cost of mobile communications in South Africa is to increase capacity through infrastructure investment, which may now be jeopardised.
Vodacom said it had scheduled capital investment to the sum of ZAR9 billion (US$848 million) over the next year, with the aim of increasing network capacity in South Africa – which it says is the way to achieve lower communications costs.
“Over the past five months we’ve been busy structuring an aggressive investment plan for South Africa that would see capital expenditure rise from roughly ZAR7 billion per year to around ZAR9 billion in the new financial year,” Boorman said.
“The idea behind this is that the only sustainable route to a lower cost to communicate is by significantly increasing capacity, thereby enabling higher usage at lower prices.
Boorman said the operator will work with ICASA in its review of MTR regulations, adding that the level of asymmetry envisaged currently by the regulator is excessive.
“In terms of next steps, we’re looking to work with the regulator to ensure that a smooth costing process takes place within the allotted six month timeframe. We do, in particular, have concerns about the level of asymmetry as it is prejudicial to our customers and amounts to a subsidy for Cell C and Telkom Mobile.”
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