The Independent Communications Authority of South Africa (ICASA) will proceed with its planned review of the mobile market with a view to further reducing mobile termination rates (MTRs), in spite of Vodacom’s warnings doing so could hinder capital investment in the sector.
The regulator will focus on urgently reviewing pricing practices and transparency in the market, in order to determine the effects of potential further cuts to MTRs beyond the currently set rate of ZAR0.40.
This review will go ahead with a view to potentially eliminating MTRs entirely in the long term, despite warnings from Shameel Joosub, chief executive officer of Vodacom, that to reduce rates beyond ZAR0.40 would remove investor incentives and achieve a slowdown in network rollout across rural areas.
“The Authority… [stated] before that it sees no reason why mobile termination rates should not be in the region of R 0.15 to R 0.25, based on benchmarks set by South Africa’s peers in Africa and the rest of the world. It is also conceivable that termination rates should tend towards zero over time,” Paseka Maleka, spokesperson for the regulator told HumanIPO.
Maleka confirmed the issue of whether there is any reason to believe cutting MTRs would deter investors from the sector will form part of the regulator’s investigations under the auspices of the market review.
The development comes as part of an ongoing battle between Vodacom and rival operator Cell C with respect to MTRs.
Cell C recently called upon ICASA to reduce rates beyond the ZAR0.40 level in order to facilitate active competition in the market, and asked the regulator to conduct a market review into larger operators’ pricing practices.
ICASA answered that it was not averse to dropping rates further, and accepted to undertake the review, conceding the payment plans offered by larger operators may constitute “predatory pricing”, with the effect of hindering new market entrants.
Vodacom has hit back, warning ICASA that to lower rates too quickly or too much would halt infrastructural development and impact negatively on rural communities which are as yet unconnected. The company told HumanIPO: “Operators need to stop hiding behind the fact that they aren’t investing and getting other networks to subsidize them.”
