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    Home » News » Lower interconnect rates stifle telecom growth

    Lower interconnect rates stifle telecom growth

    By Editor22 September 2010
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    Falling mobile termination rates and slow recovery of the economy are dampening the growth of SA’s telecommunications market.

    That’s according to a new report from BMI-TechKnowledge (BMI-T). The report forecasts that the industry will grow only 5% over the next five years, with most of that growth coming from data services.

    In 2009, the telecommunications services market was worth roughly R103bn, with businesses accounting for R45bn of that spending and consumers the balance.

    The industry faces a tough few years, partly because of the impact lower termination rates will have on the least-cost routing (LCR) market, says Tertia Smit, senior analyst at BMI-T.

    LCR providers traditionally bought bulk minutes from the mobile operators at a discount, and sold them on to their customers. But lower termination rates are undermining the business case for LCR and many LCR providers are expected to exit the market in the years ahead.

    MTN, Vodacom and Cell C in March voluntarily reduced the peak-time interconnection rate from R1,25/minute to 89c/minute. Interconnection rates could eventually be forced as low as 40c/minute if the regulator has its way.

    Revenue growth in the fixed-line market is expected to be flat for the next two years, despite an expected 4% drop in connections in the same period. “Neotel is partly responsible for this, as it continues to grow its share of the voice market,” says Smit. If Neotel and Telkom benefit from lower interconnect fees by picking up the traffic previously carried by the LCT providers, they could see their revenues increase.

    BMI-T expects the voice over Internet protocol (Voip) market to boom, growing at a compounded annual rate of 94% to a total value of R895m by 2014. — Staff reporter, TechCentral

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