Vodacom has taken strong exception to a move by telecommunications regulator Icasa to draft a wholesale call rates regime that favours its rival Cell C and more recent market entrant Telkom Mobile.
Vodacom says it supports the proposed cuts to termination rates outlined on Friday but has expressed concern over the proposed changes to “asymmetry”.
Termination rates are the fees that operators charge each other for carrying calls between their networks. Icasa has reduced these rates substantially in recent years, from R1,25 in 2010 to 40c in March 2013.
Icasa has proposed that operators with less than 20% market share receive inter-network fees from larger players that are skewed in their favour.
Although Vodacom Group CEO Shameel Joosub says he supports the goal of reducing termination rates — provided that they’re based on operators’ costs — he warns against asymmetry.
Vodacom’s share price closed down by 6,3% on Monday on fears about the impact of Icasa’s move, which will lead to a reduction in the wholesale rates starting on 1 March 2014.
“Cuts in mobile termination rates can have a profound impact on both our business and those of our suppliers, franchisees and other stakeholders,” Joosub says in a statement. “We therefore support a managed ‘glide path’ of reductions over several years.”
However, he says the proposed reduction and glide path, under which there will be an initial cut of 50% next year, are too steep and could have “serious negative impacts”.
Regarding asymmetry, Joosub says the proposed changes take the current rate of asymmetry from a 10% differential to rates “ranging between 95% and 160% over three years”.
“The accepted practice worldwide is declining asymmetry for a limited period for new entrants at a fraction of the levels proposed. We intend to engage with Icasa on this point to motivate for a more reasonable outcome,” he says in the statement.
According to Joosub, Vodacom regards the proposed asymmetry as placing Vodacom and its customers in the position of “effectively subsidising” other operators.
Vodacom Group chairman Peter Moyo made similar comments in his chairman’s note contained in the company’s 2013 annual results.
Cell C CEO Alan Knott-Craig on Monday cautiously welcomed the proposed cuts but argued that they favour Telkom Mobile more than Cell C.
Both Vodacom and MTN’s share prices fell sharply on Monday in the wake of the news while Telkom’s share price climbed to a 52-week high. — (c) 2013 NewsCentral Media
