New lower rates seen hitting mobile firm profits
Regulator says rates reduced to lower cost to communicate
South Africa’s plan to slash the fees mobile firms charge each other to terminate calls on their networks proposed by the regulator could hurt revenue and lead to job cuts, the fixed line and mobile operator Telkom said on Monday.
The Independent Communications Authority of South Africa (ICASA) on Aug. 16 published draft rules on mobile termination rates (MTRs) and fixed line termination rates, the prices telecoms operators charge for connecting calls made from other networks, in a move that could hit profits for operators.
The regulator in 2014 implemented a three-year “glide path”, the timetable for bringing down the rates gradually for telecoms companies, including Telkom, Vodacom and MTN, saying they were too high and hindered competition.
The new proposal by ICASA will see charges for terminating a call on mobile and fixed lines slide to 9 cents per minute from 12 cents for mobile operators and 3 cents per minute from 8 cents for fixed-lines over a three-year period.
The move will also reduce MTR asymmetry, where smaller mobile players such as Telkom currently charge higher fees to spur competition in a market controlled by Vodacom and MTN.
Telkom Group Chief Executive Sipho Maseko said his firm will be paid at lower rates by Vodacom and MTN, while it pays higher rates to the bigger players.
Maseko said Telkom would be forced to review its investment decisions and which regions of the country it participates in.
“The proposed fixed termination rates require cost reductions that are not feasible within a three-year time frame without significant job losses,” Maseko told reporters.
“As termination rates trend down, it puts a lot of pressure on your ability to provide the service and recover the cost in a sustainable way … how can we be able to operate profitably.”
Operators will be allowed to send in their written comments to the regulator by Sept. 7. The rules are set to take effect at the start of October.
He said one of his proposals will be to have Vodacom and MTN pay higher rates to connect callers from their networks to subscribers on Telkom and smaller mobile provider Cell C.
Africa’s most industrialised economy has in the past said it aims to double its mobile broadband coverage to 80 percent of the population by 2019. – Reuters