{"id":47668,"date":"2013-10-16T11:48:11","date_gmt":"2013-10-16T09:48:11","guid":{"rendered":"http:\/\/businesstech.co.za\/news\/?p=47668"},"modified":"2013-10-16T13:18:57","modified_gmt":"2013-10-16T11:18:57","slug":"mtn-and-vodacom-since-mtr-proposals","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/mobile\/47668\/mtn-and-vodacom-since-mtr-proposals\/","title":{"rendered":"MTR price cuts: how it will affect Vodacom and MTN"},"content":{"rendered":"

An analyst says that MTN<\/a> and Vodacom<\/a> will find it harder to absorb the latest proposed mobile termination price cuts, but how have investors\u00a0reacted\u00a0to Icasa’s proposals?<\/p>\n

The regulator (Independent Communications Authority of SA<\/a>) announced on Friday, 4 October 2013, that it wants to cut the costs of terminating a call on a mobile network to R0.10 over the next three years.<\/p>\n

A termination rate is the money networks pay to each other for connecting a call.\u00a0MTRs (Mobile Termination Rates) have declined from R1.25 in 2009 to a current price of 40 cents.<\/p>\n

Shares in Vodacom and MTN have experienced varying results since the proposed announcement, with Vodacom off nearly 8% or R9.64 \u00a0to R114.10 on the JSE; while MTN is flat, having added 65 cents to\u00a0R199.35 over the period.<\/p>\n

MTN added R2.35 or 1.19% on Tuersday (15 October), and is up nearly 13% in the year to date period.<\/p>\n

MTN is far less reliant on its SA operation than Vodacom, with a much bigger international portfolio. Vodacom is down 9.5% on the local bourse since the start of the year.<\/p>\n

Nadim Mohamed<\/a>, an investment analyst and partner at First Avenue Investment Management<\/a> said: “Once implemented, our view is that this round of MTRs cuts will hurt MTN and Vodacom quite a bit.<\/p>\n

“I guess it was always an unsustainable situation that calls to the US are cheaper than local calls and this could not continue indefinitely.”<\/p>\n

The analyst noted that MTRs act as a price floor for smaller operators and reducing these will force bigger operators to lower their tariffs.<\/p>\n

Under the proposed regulations, smaller operators such as\u00a0Cell C<\/a>\u00a0and\u00a0Telkom Mobile<\/a>\u00a0will be afforded preferential termination rates for six years, after which their rates will also be\u00a0R0.10.<\/p>\n

“This time around it will be harder to absorb the price cuts as subscriber growth is almost zero and data revenue growth is also slowing due to pricing pressure.\u00a0 We think this is why it\u2019s very important for Vodacom to diversify its earnings stream through initiatives such as the Neotel deal,”\u00a0Mohamed said.<\/p>\n

“In our view, it’s a matter of time before the market starts fully appreciating the impact of MTR cuts on the mobile industry.”<\/p>\n

Mohamed noted that\u00a0Telkom is a big beneficiary of the MTR cuts as it will be paying much less in net interconnect to mobile operators. \u00a0“Definitely, it will help with the current good run the stock is having.”<\/p>\n

“We feel that the enterprise segment remains strong.\u00a0 However, as mobile data and tariffs decline, it will be interesting to see how the consumer fixed line business performs and whether it will also have to lower its tariffs to prevent fixed-mobile substitution,”\u00a0Mohamed said.<\/p>\n

Shares\u00a0in Telkom have gained 13.3% since 4 October 2013, and 69% since the start of January, closing up on R28.59, some way off its worst level of R11.34 in May.<\/p>\n

Operators have 30 days to respond to Icasa’s proposals.<\/p>\n

More on Mobile termination rates<\/h3>\n

MTR cuts would cost us R1 billion: MTN<\/strong><\/a><\/p>\n

Vodacom bemoans asymmetry plans<\/strong><\/a><\/p>\n

Operators mull action on termination rate cuts<\/strong><\/a><\/p>\n

Icasa announces new draft call regulations<\/strong><\/a><\/p>\n

MTN, Vodacom freefall on MTR cuts<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

An analyst says that MTN and Vodacom will find it harder to absorb the latest proposed mobile termination price cuts, but how have investors reacted to Icasa’s proposals.<\/p>\n","protected":false},"author":9,"featured_media":29722,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[34],"tags":[42,2160,26,36,28,6847,1075,27],"class_list":["post-47668","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mobile","tag-cell-c","tag-first-avenue-investment-management","tag-headline","tag-icasa","tag-mtn","tag-mtrs","tag-telkom-mobile","tag-vodacom"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/47668","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=47668"}],"version-history":[{"count":15,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/47668\/revisions"}],"predecessor-version":[{"id":47725,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/47668\/revisions\/47725"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/29722"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=47668"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=47668"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=47668"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}