Orange, the giant French telecommunications operator that wants to launch a full-service mobile virtual network operator (MVNO) in South Africa, has accused some of the country’s mobile operators — specifically naming Vodacom and Telkom Mobile — of behaving anticompetitively by engaging in activity that is outlawed in Europe.

Sébastien Crozier, who heads Orange Horizons, the Orange subsidiary tasked with expanding the operator’s presence in new markets like South Africa, tells TechCentral that the Independent Communications Authority of South Africa (Icasa) should not tolerate local operators offering on-network calls that are below the wholesale call termination rate.

This practice — where operators charge less for calls between numbers on their own network than the wholesale and regulated cost of carrying a call onto another network — is forbidden across Europe and even in some other countries in Africa because it constitutes “unfair competition”, Crozier says.

Telkom Mobile recently introduced the Sim-Sonke prepaid calling plan, offering consumers on-network calls of just 29c/minute, or 11c/minute below the 40c/minute wholesale termination rate.

Vodacom, meanwhile, last year launched a prepaid calling plan in terms of which on-network calls are billed only for the first three minutes — at R1,20/minute — with the next 57 minutes free. That means an effective on-net call rate of as little as 6c/minute, or 34c/minute less than the termination rate.

Any operator that engages in this practice, no matter its size, is engaged in anticompetitive behaviour, Crozier says.

He also criticises the dynamic tariffing plans offered in South Africa — both MTN and Vodacom offer these to their prepaid customers based on network load, time of day and the location of the caller — saying they also sometimes offer an effective call rate that is lower than the termination rate.

“Of course, it doesn’t mean you can’t do promotions. Every market does that, but to have it as an official offer, we think that’s a problem. The competition authorities should look at that.”

At the same time, Crozier has again called on Icasa to develop a firm set of regulations to support the entry into the market of MVNOs. South Africa has only one MVNO, in the form of Virgin Mobile, which has managed to grab only a tiny slice of the mobile market.

Countries across Europe and several in Africa have “strong regulations” that give MVNOs powerful rights in securing access to the networks of infrastructure operators. Such regulations are wholly absent in South Africa, Crozier says, and this makes it “very difficult” to provide innovative products and for MVNOs to have full ownership of the customer.

He says another example of what he believes is anticompetitive behaviour in the South African market is the fact that some operators charge lower retail data rates than the wholesale rates they offer third parties to resell their products. “If you have a wholesale price higher than the retail price, how can you compete?”

Crozier also believes that termination rates at 40c/minute are “absolutely very high”, saying that despite steep cuts over the past four years — from a high of R1,25/minute in peak calling times — the rate is still two to three times higher than in Europe.

“It’s a real problem for MVNOs to enter the market. MVNOs can bring innovation and competition, but what we want is fair competition,” he says. “We are surprised because in some areas, like banking, South Africa is very advanced. On the telecoms side, South Africa is behind when you compare it even to certain countries in Africa — I’m not even talking about Europe.”

He adds that the South African mobile market is “insufficiently competitive” and that having effective regulation for MVNOs encourages investment, leads to economic growth, reduces prices for consumers and creates jobs.

“There is simply not enough competition and the consumer pays a very high price for voice calls and use of data is not going to develop because of a lack of innovation,” he says. “Players that want to offer content [over the data networks] are not able to come into the market because the wholesale prices are not capped [by Icasa], so it’s a commercial agreement each time.”

Crozier says Orange has ruled out buying a mobile operator in South Africa for the short and medium term. However, he says the company is eager to offer new services and products to consumers here and is exploring the possibility of working with a consortium, which he doesn’t name, to build an extensive access network based on Wi-Fi technology.

“There is a lack of Wi-Fi in this country,” he says. “We could be involved in the next few months in a consortium to launch Wi-Fi. It’s not an acquisition, but an investment to be a player in the Wi-Fi area.” — (c) 2013 NewsCentral Media