Cell C acting CEO, Jose Dos Santos has hit back at MTN after the latter dismissed the argument that lower mobile termination rates (MTRs) results in lower retail prices.
MTN South Africa CEO Zunaid Bulbulia said this week that there is no statistical evidence of a link between rate of MTR cuts and a reduction in retail rates. He said that the relationship between MTRs and lower call prices are tenuous at best.
Bulbulia said that a sudden reduction in MTRs can also reduce MTN’s incentive to invest heavily in its network in rural areas and continue its subsidizing of mobile phones.
The Independent Communications Authority of South Africa’s (Icasa’s) new draft call termination regulations suggest a glide path for the next three years.
The draft regulations propose a reduction from the current 40c per minute to 20c per minute in March 2014. In March 2015 the rate will be reduced to 15c per minute and in March 2016 it will be 10c per minute.
The draft regulations also suggest significant asymmetry which will be reduced over a 5 year period.
Cell C bites back
In an interview with MyBroadband, Dos Santos rejected MTN’s argument.
“MTRs act as a floor for retail prices, so if we still had to pay a wholesale price of R1.25 to terminate calls, Cell C would not have been able to drop its retail rates to 99c,” he said.
Bulbulia also said that he believes that Cell C could have launched a 99c per minute flat rate, even if MTRs were still R1.25. He said that if Cell C invested enough in their network, they would have enjoyed more on-net traffic which would have made these lower rates possible.
Dos Santos said that Icasa has a mandate to fulfil the objectives of the ECA.
These objectives include the promotion of competition and ensuring prices are affordable for consumers. “MTN seems to be ignoring this in its very narrow attack on Cell C in the media,” he said.
“Lower termination rates are one remedy that Icasa can employ to reduce input costs making reduced prices possible,” said Dos Santos.
“Asymmetry is another remedy Icasa can employ to strengthen competition in the market. Stronger and more sustainable competitors will have the effect of reducing prices to consumers,” he said.