Carrim questions MTR impact on MTN, Vodacom

Communications Minister Yunus Carrim says he doesn’t believe that the call termination rates proposed by the Independent Communications Authority of South Africa (Icasa) will “severely debilitate” large operators, including MTN and Vodacom.

Icasa officially introduced South Africa’s new mobile termination rates (MTRs) in January 2014, which would see a dramatic decrease over the next three years.

MTRs are the fees operators charge one another when calls from one network have to be routed to another.

The asymmetry would let Cell C and Telkom Mobile charge MTN and Vodacom far more to terminate calls on their networks than the larger networks could charge Cell C and Telkom Mobile.

Icasa’s new call termination regulations were set to come in effect from 1 March 2014, but the regulator said it would delay until 1 April 2014, after both MTN and Vodacom initiated legal proceedings against the watchdog.

MTN and Vodacom argue that Icasa’s decision was reached without following due process. Both have said that the termination rates will mean billions in lost revenue.

MTN’s South Africa CEO Zunaid Bulbulia has said that the company would have to take costs out of the business, “right across the board”.

In its court documents, MTN said that the new 2014 call termination rates will cost the company R142,931,363 in lost aggregated interconnect revenue per month.

In an interview on CNBC Africa, Carrim said that department of communications recognised that mobile operators like Vodacom and MTN should get an adequate return on their investment, with a surplus to reinvest.

“However, we think that there should be balanced with the right of the consumer to have a lower cost to communicate.”

“By any measure, the cost to communicate in this country is very high,” the minister said, noting that operators have already conceded that.

Carrim said he doesn’t believe that the rates Icasa has proposed will “severely debilitate” the large operators. He noted that MTN gave back approximately R15 billion to its investors in 2012, with Vodacom around R12 billion.

“It’s not as if they aren’t making an adequate return on investment.”

He said that in 2010, operators made similar claims of operational and job losses.

“Obviously, we recognise that there are challenges, but we are saying that MTN and Vodacom by all accounts own about 85% or more of the revenue that is secured from mobile usage in this country. We have to encourage competition.”

Last week, however, MTN announced that it has reduced the staff headcount for its South African operation by approximately 1,000 people.

The operator’s South African operation also weighed on group results for the year ended December 2013, with local revenue down to R39.7 billion, from R41.3 billion in 2012.

The minister also requested that operators negotiate and talk to Icasa, before heading off to court.

Carrim says he doesn’t believe he lashed out at Vodacom and MTN as widely reported.

“All I simply said was go to the court if you have to, only as a last resort. That is certainly a legal right.”

More on MTRs

Icasa delay saves MTN R286 million

MTR cuts would cost us R1 billion: MTN

MTN SA announces job cuts

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Carrim questions MTR impact on MTN, Vodacom