A research report compiled by Research ICT Africa has revealed reductions to the mobile termination rate (MTR) made by regulators is beginning to positively impact prepaid mobile prices in South Africa.
“The third termination rate reduction, which came into force in March 2013, has for the first time enabled smaller mobile operators to drive down the prices of dominant operators MTN and Vodacom… For each off-net minute, an operator has to pay the termination rate to the terminating network,” said Research ICT Africa in their report.
However, Research ICT Africa said MTR is still “far from cost” and South Africa’s cheapest mobile prices still lags behind other countries where regulators enforced competitive pricing through cost-based MTR.
MTR rates reportedly decreased to ZAR0.40 (US$0.04) per minute in March this year while the reductions in March 2011 and 2012 had no significant effect on retail prices.
“Further reductions of termination rates and retail prices will expand the market, improve consumer welfare and improve the profitability of mobile operators – a win-win for all,” said Research ICT Africa.
Regarding the financial performance of South Africa’s leading mobile operators, Research ICT Africa said MTN’s postpaid and prepaid subscribers have increased during the course of the last eight financial year quarters.
MTN’s revenues reportedly increased by 7 per cent and its earnings before interest, taxes, depreciation and amoritisation (EBITDA) increased by 6.5 per cent for the 2012 financial year compared with the results of 2011, “while the EBITDA margin remained constant at a high 35.2 per cent”.
MTN’s SMS and data revenues increased 58 per cent and 38 per cent respectively.
“With evidence of significant free message data service substitution for SMS, one would have thought that revenues from SMS would be on the decline.”
The report said Vodacom’s performance in South Africa has remained solid since March 2010.
Vodacom’s revenues have grown to ZAR58.6 billion (US$5.9 billion) this year. Vodacom’s EBITDA margin improved slightly by almost one percentage point and the operating profits increased from ZAR16.7 billion (US$1.7 billion) to ZAR17.4 billion (US$1.7 billion).
Furthermore, Research ICT Africa said Vodacom experienced an increase in voice traffic and a decrease in SMS traffic.
The report however, said the lack of transparency regarding Cell C’s financial status has rendered “any assessment of the dangers of them exiting the market (or simply their viability within the current competitive environment) is impossible”.
However, Cell C’s reduction in prices prompted the country’s dominant operators to reduce their own prices.
“It is significant that none of the dire warnings from South Africa’s dominant operators, about the negative impact of proposed reductions in MTRs, has materialised. MTN’s and Vodacom’s key performance indicators look better than those for previous years,” said Research ICT Africa.
“With the growing demand for data services the South African regulator ICASA (Independent Communications Authority of South Africa) needs to enable operators to respond to the changing nature of the business and to innovate and grow new services in response to declining voice revenue streams,” concluded Research ICT Africa.
