“Stop hurting South Africa”, Telkom CEO, Sipho Maseko, told MTN and Vodacom in an open letter published in the Sunday Times of 2 March 2014. This follows legal action by Vodacom and Cell C after the Independent Communications Authority of South Africa (ICASA) published new call determination rates which will favour Telkom Mobile and Cell C.
The announcement by the two cellular network companies of legal action against ICASA has irritated many South Africans who have taken to twitter and radio talk shows to demonstrate their dissatisfaction with the high cost of telecommunications in South Africa. They support ICASA in its efforts to lower the cost of communication.
According to the call termination regulations, 2014 will see mobile termination rates reduced from the current 40c per minute to 10c per minute over the next three years. The regulations further call for significant asymmetry, up from the current 10% to 120% from March 2014, 180% from March 2015, and 300% from March 2016.
These regulations will benefit Telkom and Cell C, but will cost Vodacom and MTN hundreds of millions of rand in lost revenue.
In his letter, Maseko said that in 1994, mobile termination rates were introduced as a way for Telkom to subsidise MTN and Vodacom to build their networks. To achieve this, Telkom had to pay MTN and Vodacom significantly more than what they paid Telkom for the same service, resulting in Telkom contributing over R50-billion to subsidise the two cellphone giants.
Both Vodacom and MTN are pleading poverty and claim that the proposed termination rates will impact on their investment in new infrastructure. Maseko dismisses this claim. He said in his letter “despite your recent claims, history has shown that lowering the mobile termination rates has not stopped your capital investment, nor your return to shareholders. In fact, in 2012 Vodacom shareholders were paid R12-billion in dividends, while MTN paid almost R15-billion to their shareholders.
Commentators over the past few days have said that the legal move by Vodacom and MTN will hit ICASA hard as the authority is under-resourced and will now have to spend its limited funds on defending its decision in court, against two companies that have substantial resources to hire the best legal brains.
This is not in the interests of South Africa. As Telkom commented about Vodacom and MTN standing in the way of lowering mobile termination rates: “You are standing in the way of SA’s future!”
The latest spat between MTN and Vodacom and the regulators has angered the Minister of Communications, Yunus Carrim. He has warned that the inability of the industry to agree on key issues, and the propensity of companies to take matters on review in court at the drop of a hat, was holding back South Africa’s technological progress.
Hot on the heels of the rhetoric about termination rates, Telkom announced that it has entered into a heads of agreement (HoA) with MTN South Africa. The HoA explains that the parties intend to conclude network management services and reciprocal roaming agreements, whereby MTN will take over financial and operational responsibility for the rollout and operation of Telkom’s radio access network. Each party will be able to roam on either party’s network.
Maseko explains: “In keeping with our plans to de-risk our mobile business we have explored various options in recent months, and I am pleased that we are at this stage of engagement with MTN. The conclusion of an agreement will allow us to expand our mobile coverage and to reduce our operating costs and capital expenditure significantly.”
Just makes you wonder what all the earlier noise was about?