In recent Telkom trading statement, the operator said its normalised earnings for the year ended 31 March 2015 will be up significantly.<\/p>\n
This is thanks, in part, to lower payments to mobile operators \u2013\u00a0due\u00a0to a\u00a0reduction in termination rates \u2013 which resulted in a benefit R743 million.<\/p>\n
Call termination rates are the fees networks pay one another to connect voice calls to one another\u2019s networks, and was the subject of a court battle between Vodacom, MTN, Cell C, and Icasa during 2014.<\/p>\n
Cell C was fighting for greater asymmetry, while Vodacom and MTN were against the move.<\/p>\n
Asymmetry means that smaller operators such as Telkom\u2019s mobile arm and Cell C are able to charge more to connect calls to their networks than Vodacom and MTN are allowed to charge in return.<\/p>\n
MTN and Vodacom warned\u00a0they would lose out on R1 billion each in revenue if Icasa went ahead with a proposed\u00a0increase in\u00a0asymmetry (and decrease in termination rates) for Cell C and Telkom.<\/p>\n
In September 2014 Icasa announced its final termination rates<\/a><\/strong> which lowered asymmetry from the levels Icasa had previously proposed, but stated that for an operator to qualify for asymmetry it must have less than 20% of the share of total terminated minutes in either the fixed or mobile market.<\/p>\n Previously, an operator qualified based on market share \u2013 which had to be under 25%.<\/p>\n Following the decision by Icasa on termination rates, which still benefited Cell C and Telkom, thelatter<\/a><\/strong>\u00a0reported the\u00a0R743 million\u00a0benefit.<\/p>\n \u201cOur performance for the full year to 31 March 2015 continued the trend experienced and reported on in our interim results where a challenging operating environment was once again compounded by competitive pressures and regulatory interventions,\u201d said Telkom.<\/p>\n In recent trading updates from MTN and Vodacom, both operators reported losses in revenue based on the termination rates.<\/p>\n \u201cService revenue in SA declined 5.8% due to [termination rates]\u00a0in April 2014 and by increased competition and weaker consumer spending,\u201d said Vodacom\u2019s in its Q3 2014 report.<\/p>\n \u201cThe impact of the lower [termination rates]\u00a0was to reduce service revenue by almost a billion rand,\u201dsaid Vodacom CEO\u00a0Shameel Joosub in November 2014.<\/p>\n MTN, meanwhile, saw\u00a0local revenue decline 3.9% according to its latest full-year results, mainly due to\u00a0a 36% decline in interconnect revenue due to lower mobile termination rates.<\/p>\n MTN said it was now a net payer of termination rates, with the balance seeing the group pay over R1 billion.<\/p>\n Icasa said that while\u00a0a reduction in wholesale rates such as call termination will\u00a0not necessarily mean consumers will see an immediate reduction in retail prices,\u00a0rates have come down almost immediately when the previous call termination rate cuts were announced.<\/p>\n \u201cThe extent to which retail rates drop is operator-dependent,\u201d Icasa added.<\/p>\n What has happened, however, is that both MTN<\/a><\/strong> and Vodacom<\/a>\u00a0<\/strong>increased their prices\u00a0\u2013\u00a0which the operators\u00a0warned would happen following Icasa\u2019s decision.<\/p>\n Mobile networks warned<\/strong><\/a> that an unfavourable outcome could result in \u201ccatastrophic\u201d consequences, including price hikes, while Vodacom said the impact on revenue\u00a0\u201cmeans less money for Vodacom to invest in network upgrades and bringing overall call costs down\u201d.<\/p>\n Cell C also recently hiked its contract prices<\/a><\/strong>, which came into effect on 1 February 2015, along with Telkom which unexpectedly\u00a0increased its line rental prices<\/a>\u00a0<\/strong>mid-year.<\/p>\n Retrenchments cost Telkom hundreds of millions<\/a><\/strong><\/p>\n SA mobile subscribers: Vodacom vs MTN vs Cell C vs Telkom<\/a><\/strong><\/p>\n Why Telkom is increasing line rental prices<\/a><\/strong><\/p>\nPrices\u00a0meant to drop<\/h3>\n
More on\u00a0mobile in SA<\/h3>\n