Telkom yesterday filed an application with the Independent Communications Authority of SA (ICASA) that seeks to raise its tariffs by the maximum percentage allowed by the regulator.
Services that Telkom has the exclusive right to operate, including all interactive voice calls, are capped at an annual increase of 1.5% below the consumer price index (CPI). With government projecting a CPI of 6.9% for January 2001, Telkom says its basket of services will increase by a total of 5.4%.
That is, unless MTN and Vodacom give up a beneficial interconnect agreement between the three companies. The agreement relates to payments between the companies for calls from fixed to mobile phones and from mobile to fixed, for the use of each other`s networks.
Telkom COO Tom Barry says the interconnect agreement, established in 1993, was based on unrealistic projections of the number of cellular customers in the country. "Adjusted for inflation, the revenue Telkom receives is almost insignificant," he says, as the fees have been fixed for seven years.
The price of infrastructure that Telkom provides to the mobile operators has also been fixed since 1993, he says, which means that MTN and Vodacom are effectively paying less for facilities than any other customer.
"We are looking hard at this and will affect a price increase there before we do so elsewhere," Barry says.
Zero impact
Should the agreement be amended before the new tariffs are instituted, Telkom says, the increase will be less. "The impact could be between zero if time runs out and we need to keep it as is and quite substantial," says Barry.
MTN begs to differ. "Look at the logic of it," says MTN legal and regulatory advisor Graham de Vries. "Telkom is claiming that all users are going to pay for this particular agreement. They are claiming that the two cellular operators are chasing up costs to all their users."
The agreement must be amended by mutual agreement if possible, and Telkom has little hope that the cellular networks will agree to pay more for its services, but Barry hopes their approach will be "it has been a nice ride but like all things it has come to an end".
To force that philosophy, Telkom has adopted a three-pronged approach. It has officially requested a renegotiation of the agreement, it has filed a complaint with ICASA based on price discrimination, and it has stated that it will not sign a similar agreement with the third cellular operator when it is licensed.
The discrimination case was filed in August, and Barry says it is not "ripe for a hearing".
These moves aim to manufacture a crisis that Telkom hopes will force ICASA to act. Barry says ICASA has the authority to step in and make a ruling on the agreement if it is given a reason. "We believe they have the right to involve themselves when there is an external problem."
Last resort
De Vries agrees that ICASA has the right to impose an agreement, but only under very specific circumstances. "It is possible as a last resort."
By refusing a third operator the same agreement, Telkom would disadvantage the new entrant relative to MTN and Vodacom, something it hopes the regulator will not be able to ignore. Similarly, ICASA is expected to level the playing field if it can prove price discrimination.
Barry says simple negotiations are unlikely to bear fruit without such prodding. "If any of us were in their position we would do the same."
He admits the possibility that the operators could turn to the courts for relief and extend the matter, but hopes such a scenario would be unlikely.
De Vries suggests that pressure may have to be applied on the other side.
"Telkom has consistently and persistently refused to negotiate on the interconnect agreement," he says. "MTN is always willing to talk, but if one of the parties doesn`t wish to negotiate there is little you can do."
Telkom`s complaint is related to court action it started against the mobile companies in August surrounding PABX equipment offering a "direct connect" solution, also called "cellboxes". The equipment routes calls to the mobile networks directly from the PABX to the nearest cellular base station, avoiding the Telkom network and fees related to its usage.
Exact tariff increases for specific services will not be announced until negotiations have closed, Telkom says.
Vodacom, which is 50% owned by Telkom, declined to comment on the issue.
Related stories:
Telkom takes MTN, Vodacom to court
Share