MTN, Vodacom freefall on MTR cuts

 ·7 Oct 2013
Icasa

Vodacom Group and MTN declined in trade on JSE on Monday (7 October), after the Independent Communications Authority of South Africa (Icasa) announced plans to cut mobile termination costs dramatically.

Vodacom fell as much as 5.63% – or R6.97 – to R116.77 shortly before 13:00, while MTN lost 3.31%, or R6.60, to R192.50. The latter company is less reliant on its SA operation than Vodacom, with a much bigger international portfolio.

In results for the year ended March 2013, Vodacom said that revenue from its South African operation amounted to R58.60 billion, out of a total R69.91 billion.

Vodacom’s operations include networks in Tanzania, the Democratic Republic of Congo, Mozambique, Nigeria and Lesotho.

MTN, meanwhile, operates in 21 countries in Africa, and the Middle East.

In financial results for the year ended December 2012, MTN group revenue amounted to R135.11 billion, with South Africa making up only R41.4 billion of that total.

Icasa gave notice of the publication of its new draft call termination regulations on Friday, 4 October 2013.

A termination rate is the money networks pay to each other for connecting a call.

The current rate is about 40 cents a minute, but Icasa’s draft plan proposes that this should be cut to 10 cents cents a minute within three years, having already reduced from R1.25 a minute in 2010.

Icasa has proposed the following tariffs for calls that terminate on a mobile network:

  • Current: R0.40
  • 1 March 2014: R0.20
  • 1 March 2015: R0.15
  • 1 March 2016: R0.10

Both Vodacom and MTN will suffer the most from a cut in MTRs, as smaller players including Cell C and Telkom will pay them less to terminate a call on their networks.

Shares in Telkom rallied 4.44%, or R1.12 to R26.35. Shares in the group have gained 55.64% so far this year.

Draft regulations are expected to be published during this week, and stakeholders will have 14 working days following the publication of the Government Gazette to submit written comments on those regulations.

More on Icasa, MTN, and Vodacom

We are winning: Cell C

New call termination rates coming

New Icasa Cost to Communicate timelines

ICASA’s plans to reduce prices: the way to go?

Show comments
Subscribe to our daily newsletter