Vodacom, MTN say no to retail rate cuts - TechCentral

Vodacom, MTN say no to retail rate cuts

Wholesale call termination rates come down at midnight tonight, but consumers shouldn’t expect retail price cuts from the big mobile operators on the back of the reductions.

Both Vodacom and MTN have confirmed to TechCentral that they have no plans to cut retail prices as a result of tonight’s reduction in the wholesale rates that operators charge each other to carry calls between their networks.

From tomorrow, peak-time termination rates for mobile calls fall from 89c/minute to 73c/minute; off-peak rates come down to 65c/minute from 77c/minute.

The new rates are mandated by the Independent Communications Authority of SA (Icasa), which regulates telecommunications operators. They’ll fall again in March 2012 and March 2013.

Politicians and consumers have long hoped lower termination rates will translate into lower retail rates. However, after the first (voluntary) cut in mobile termination rates last March, the only big operator to make significant cuts was Telkom, which passed on the full benefit by slashing landline to mobile rates.

With the second wholesale rate cut in a year taking effect tomorrow, SA’s two largest mobile operators have both said consumers will not enjoy any change in retail rates flowing from the reductions.

Vodacom spokesman Richard Boorman says since Vodacom is a net receiver of calls, reductions in interconnect rates do not produce savings for the company to pass on to customers. “In fact, the opposite is true,” he says.

The operator says that for every 10% decrease in termination rates, its profits are knocked lower by about R200m.

Boorman says that although Vodacom won’t cut its retail rates, greater competition that should be fostered by lower wholesale rates should help bring down retail prices at some future date.

MTN chief corporate services officer Robert Madzonga says there is no direct link between wholesale termination rates and retail prices. “Some prices go up, some stay the same, and others decline as part of normal competitive activity, not regulatory intervention,” he says.

It’s not only the mobile operators that will be affected by Tuesday’s rate cuts. Fixed-line termination rates are also being cut — from 23c/minute during peak times, to 20c. Off-peak rates remain the same at 12c.

Telkom says it must still decide whether it will pass on any savings to customers. It says it will comment on the matter at a later stage.

However, there is hope for consumers using other operators. In anticipation of lower rates from MTN and Vodacom, Neotel announced its own retail price cuts for calls to the two mobile operators. Those cuts take effect on Tuesday.

Neotel’s rate to cellphones has been cut to less than R1/minute for most calls, it says. Calls to MTN and Vodacom phones will now cost 95c/minute during peak hours and 85c/minute in off-peak times. Those rates exclude VAT.

Calls to Cell C and 8ta cost R1,20 at peak and 96c at off-peak. Neotel chief technology officer Angus Hay says MTN and Vodacom have reduced their termination rates, whereas Cell C and 8ta, Telkom’s mobile arm, have not.

8ta and Cell C look set to benefit from an “asymmetrical termination rate”, meaning that under Icasa regulations they can charge other operators up to 20% more than the regulated rate.

Telkom says 8ta will charge other mobile players in terms of Icasa’s rules. While Telkom has not specified the exact rate it is charging, it is likely going to charge about 88c/minute during peak times, and 78c/minute off-peak (a 20% premium in both cases).

Cell C has not confirmed whether it will implement an asymmetrical rate. If it does, it’s likely to charge the highest allowed amount to other operators.  — Candice Jones, TechCentral


  1. seperate, competing companies both decide not to drop their rates, “Some prices go up, some stay the same, and others decline as part of normal competitive activity, not regulatory intervention,” he says
    .Where is this so called “competitive activity “,? Maybe it could found amongst the bakers or in the brickworks

  2. Wow, what a surprise! (Sarcasm)
    I thought the whole point in dropping interconnect fees was to make telecommunications cheaper for the end user? Guess not!
    I wouldn’t be surprised to see retail rates go up soon! I mean these networks have to make up the losses somehow for their shareholders!

    What now ICASA? what a pointless piece of legislation

  3. Collusion like this is nothing new. All that’s going to happen is that when eventually the competition board takes them to task, they’ll just pass it on to the consumers.

  4. Well Vodafone must make its money first before you can see any meaningful dropping of prices that is the price we pay for selling Vodacom to the British. We sold Iscor to Mittal and paid dearly for steel and we never learn. Line up Eskom, its time for the next cash up. Very wise for Telkom to sell Vodacom and go and start 8ta and play around in the African market.

    Interesting that in the roundtable discussions with the Minister these operators complained about a weak regulator when they are engaged in paoching, lobbying and litigation that makes the work of the regulator impossiblle. Just go and look at Budget Statement in India they regulate the entire economy and promised reduction in prices and their operators will not sabotage govt plans.

  5. Its good to see Neotel making a difference. We have to move market share to Neotel then only we will see significant progress. Telkom need to feel the pinch. I say port to Neotel. We have choice.

  6. A question for Vodacom and MTN leadership. What about South Africa? Does it matter to you at all that your anti-competitive behaviour is short selling this country’s future? I weep for your lack of vision.

  7. Our lack of innovation in this space is gona “cost” us in more way than one.
    We falling behind. The rich are falling over the money.

  8. It’s so obvious these guys are lying through their teeth – less money is being passed around between them for interconnects. It’s a closed system. If someone is receiving less money, that means others are giving less. Yet everyone says they’re losing.

    I think the reality is that the operators have been hiding costs away under the “interconnect” heading in their books, and they’ve built this into a flawed business model, and this is the result.

    ICASA should really sink their teeth into this and find out who’s lying and hopefully find some law they’re breaking to fine them to set an example.

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