Cell C wins competition ruling

The Competition Commission's price discrimination finding could see MTN owe smaller competitor Cell C R200 million in fees.

The commission has referred the case to the Competition Tribunal for a final ruling.

The issue relates to a two-year-old feud between the network operators, with Cell C claiming MTN has been charging it full interconnection commercial rates for its community service terminals (CSTs).

Cell C originally lodged the complaint with the commission in April 2005. It alleged MTN charged it the commercial interconnection fee of 125c per minute, while the community interconnection rate should be 6c per minute.

MTN counter-argued that Cell C was not adhering to its licence conditions and that is why it charged the commercial rate. In terms of the network licence conditions, the operators are obliged to roll-out CSTs to underserviced areas. Users in these areas are classified as having an income of less than R4 000 per month.

MTN objected to Cell C's placement of CSTs, alleging it created CSTs in areas that did not fall within the ambit of "underserviced areas". To determine CST placements, Cell C used a study of fixed-line teledensity compiled by the Human Sciences Research Council. The Independent Communications Authority of SA approved the use of this data to establish the CSTs.

Thulani Kunene, head of enforcements and exemptions at the Competition Commission, says MTN is charging Cell C the commercial interconnection rate of 125c per minute during peak periods and 77c per minute during off-peak periods. It should charge the CST interconnection rate of 6c per minute, for all calls made from every Cell C CST to phones on the MTN network.

"On the contrary, MTN charges Vodacom the agreed upon CST interconnection rate of 6c per minute."

Kunene says the commission found MTN's conduct "amounts to" price discrimination.

In reaction to the finding, Cell C's chief corporate affairs officer Zoena Motshabi says: "Cell C believes it performed everything in its power to ensure its roll-out is in line with its licence obligation. In addition, we have always been confident that the Competition Commission would rule in the interest of fair competition."

Kunene says if the Competition Tribunal should uphold the commission's finding, it will then order MTN to cease the practice immediately. He explains that no fine or penalty would be levied, as it is a first offence, although the operator will be liable for the R200 million in fees.

"However, it would potentially open the door for further legal action by Cell C or any other aggrieved party," he says.

In terms of the procedure, MTN has 20 business days to respond to the commission's findings and the commission has 15 business days to reply to this response.

Kunene says a final decision by the Competition Tribunal depends on the length of the legal discovery process.

MTN GM of regulatory affairs Graham de Vries says: "MTN is aware of the complaint by Cell C and the finding by the Competition Commission. MTN will await the notice of referral by the Competition Commission to the tribunal and will participate further in the process."

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