Cell C wants the call termination rates proposed by the Independent Communications Authority of South Africa (ICASA) to be pushed back by at least three years.
In an interview with ITWeb TV, Cell C CEO Jorge Mendes says the proposed call termination rates will be disastrous for smaller players such as Cell C, while benefitting the Vodacom and MTN duopoly.
In March, the telecoms regulator published the draft amendments to the Call Termination Regulations, of 2014 and 2018, for public comment.
Voice call termination is the service that one network offers another to carry voice traffic to its end-users. The charge for this service has been the subject of concern, where it has been viewed as a constraint to effective competition, as well as a driver of high retail prices of telecommunications in South Africa.
ICASA notes these regulations are part of the broader measures to reduce the cost to communicate.
The regulator said in a recent notice that it wants mobile termination rates slashed from 9c/minute excluding VAT (13c for smaller operators), to 7c (9c) on 1 July 2024 and 4c (4c) on 1 July 2025.
Telkom, SA’s fixed-line operator, has already expressed dismay at ICASA’s decision to cut fixed call termination rates and mobile termination rates asymmetrically.
“The Cell C position is very clear. The proposal is to become symmetrical and we are saying that should not happen at least for the next three years. The reason for that is about 80% of the voice traffic is still controlled by MTN and Vodacom, and as a result, they’ve got pricing that is skewed for on-net because they’ve got the majority of that market share,” says Mendes.
“Their argument is that we are no longer a new entrant – that 22 years later, we should have the benefit of being around for a long time and, therefore, we should not have asymmetry.”
In its proposal, ICASA says another central feature of the call termination rates is the phasing out of asymmetry between what large and small mobile operators can charge, in accordance with the decision set out in the authority’s 2022 findings document.
New entrants into the voice services market will, however, qualify for asymmetry for a limited period of three years after entry into the market, it adds.
By phasing out asymmetry and providing a transitionary period for new entrants, ICASA says it aims to empower operators to adapt gradually, while maximising benefits for consumers.
“What they forget is that they intentionally put the call termination rates up when Cell C launched that were not there, and they put them up to R1.40,” Mendes says.
“So, Cell C had a false start right from the beginning and that has never corrected itself. This organisation hasn’t made profit for a long time, ever since it launched. The reality is that there has been no benefit achieved through this because of the sheer size of the two organisations [MTN and Vodacom].
“We have had the cheapest call rate in the market for more than 10 years. It’s nearly a 100% cheaper than anybody else and still we have not managed to break that control the two big operators have.”
He believes it will absolutely be a disaster if the regulator goes ahead with symmetry for smaller players.
“This will take out, comfortably, over R300 million (from smaller players) from a revenue perspective. The intention was this benefit will be passed on to the consumer but the reality is, I have actually challenged the regulator that as the termination regulations change, let the two big operators sign in writing that they will reduce the prices to the customers, but they won’t. They will still control 80% of the voice traffic, so nothing will happen.
“They are simply going to bank more margin and they are already very profitable companies. So, we have a very strong position that asymmetry must remain at least for three years.”
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