MTN says it is considering taking legal action against Cell C over the latter’s aggressive campaign slating it for taking the Independent Communications Authority of South Africa (Icasa) to court over termination rate regulations.
The Cell C ad campaign creates the impression that MTN is fighting against lowering call rates, and that MTN is funding its legal action against Icasa through its customers.
Cell C has also launched a social media campaign, posting messages to Twitter and Facebook asking, “Are the giant cellular networks too greedy?”, and, “Do you feel that big cellular networks are making obscene profits?”.
Responding to the campaign, MTN SA general manager of commercial legal, Fusi Mokoena said that the network is “exploring its options”, in terms of litigation.
Graham Mackinnon Cell C chief legal officer, told MyBroadband that “Cell C does not believe that there is a basis for any legal action by MTN but is prepared to meet any claim that MTN may bring”.
War of the words
The battle between Cell C and MTN stems from the new call termination regulations recently published by telco watchdog, Icasa.
The new regulations aim to significantly reduce mobile termination rates from its current level of 40c/minute to 10c/minute by 1 March 2016, with high levels of asymmetry for smaller operators.
This means Cell C and Telkom Mobile would be able to charge Vodacom and MTN more for sending calls to their networks than the larger networks could charge them.
MTN made good on its threats to challenge the regulations through litigation and filed an application with the High Court seeking to get the new rates set aside.
According to MTN, while it supports a reduction in call rates for customers, the process Icasa followed in establishing the new rates was not shared with the operator.
Additonally, MTN SA CEO, Zunaid Bulbilia, described the new rates as a regulatory attack, with asymmetry levels in place to prop up competitors’ positioning in the market at the expense of larger operators’ investment punch.
“If investors are required to divert scarce investment dollars away from South Africa’s Broadband future to subsidise failing voice business plans, then we have to ask what competition is for,” Bulbulia said.
Cell C not backing down
Cell C Acting CEO, Jose Dos Santos, noted in response to MTN’s court application that, for all its talk against asymmetry, MTN and Vodacom both enjoyed the benefits of the system for decades.
“MTN…conveniently leaves out the bit about the asymmetry it, together with Vodacom, has enjoyed for 20 years against Telkom,” Dos Santos said.
“In any event, MTN would have us believe that cash is being removed from the sector altogether whereas it remains within the sector but just not with MTN.”
“Asymmetry is a common remedy to make sure that competition is possible – in numerous countries around the world asymmetry is afforded to new entrants, operators with defective or inefficient spectrum, operators which do not have sufficient scale to compete, and for other reasons deemed to be appropriate by the relevant regulator in those markets,” the acting Cell C chief said.
Telkom, echoing Cell C’s stance, said that any delay to the implementation of the rate cuts is to the detriment of consumers.
“This delay means that larger mobile operators will continue to enjoy favourable termination rates at Telkom’s expense especially if we consider that from 2001 to 2012 Telkom has subsidised these operators,” Maseko said.
Silence from the red corner
Vodacom – as the other big player to be hit by the new regulations – has so far remained relatively tight-lipped in the ongoing war of words.
Vodacom has expressed similar concerns to MTN regarding the rate cuts, showing in an infographic about MTRs that, by paying smaller operators more than they pay Vodacom, call costs won’t come down.
“Because Vodacom gives more money to the other guys than they give to Vodacom, this means less money for Vodacom to invest in network upgrades and bringing overall call costs down,” the operator said.
Vodacom has shied away from answering questions about whether it would join in MTN’s legal application, saying only that it appears as though Vodacom and MTN have similar concerns.
“We’re obviously not in a position to comment on the merits of their approach,” Vodacom said previously.
The operator has indicated that it is “working with the authorities to try and sort things out”.
After pushing back the implementation date of the new regulations from 1 March to 1 May 2014 in order to structure its legal response to MTN, Icasa has brought the start date forward to 1 April 2014.
“After studying the papers, the Council of Icasa is also of the view that a delay of one month is sufficient to ensure that the affected parties have sufficient time to properly prepare their answering papers,” Icasa said.