Vodacom has come out guns blazing against proposals by its regulator, Icasa, that mobile call termination rates be slashed over the next three years while giving the company’s smaller rivals a leg up through “asymmetry”.
Icasa wants the new rates — which operators charge each other to carry calls between their networks — chopped in half, to 20c/minute, on 1 March 2014. It then wants them cut in half again, to 10c/minute, by 2016.
At the same time, it has proposed aggressive asymmetry that favours Cell C and Telkom Mobile — the smaller operators will pay less to Vodacom and MTN for calls between their networks than the other way around. Both MTN and Vodacom have objected strenuously to Cell C, which was licensed 13 years ago, being advantaged in this way.
Icasa has proposed increasing the level of asymmetry offered to smaller players from 10% now to 95% in March, to 120% in 2015, and to 160% in 2016.
“The proposed new rates are significantly lower than the rates that were published in previous years and [there is] a higher degree of asymmetry,” Vodacom said in notes accompanying its interim financial results for the six months ended 30 September 2013.
“The new rates will require adjustment of our forecasts, including capital investment and operating expenses, if approved in the current year,” the operator said. “They are also likely to impact our price transformation programme. We are actively participating in the consultation process [with Icasa], with the aim to get to a more reasonable outcome.”
On Monday, Vodacom reported that group revenue had risen by 6,6% compared to a year ago, with strong growth in its non-South African operations and “improved growth trends” in its home market. Headline earnings per share rose by 10,9% “as a result of strong operating profit growth”.
“A cornerstone of our strategy is sustained investment in network capacity,” said group CEO Shameel Joosub. “With increased capacity, we’re able to offer better value and support higher usage without impacting quality. In South Africa, we invested R3,1bn in the network during the period and increased 3G coverage to 88,9% of the population.”
He said that to cater for continued growth, Vodacom intends accelerating network investment. We are currently in the process of determining the investment allocation per country.”
Joosub said Vodacom is “hopeful that the regulator will consider the crucial role that continued investment plays in facilitating further price reductions”.
Vodacom’s group active customers increased by 9,7% to 53,8m, with net connections of 949 000 for South Africa and 2,3m in its international operations. Data revenues grew by 29%.
Group earnings before interest, tax, depreciation and amortisation grew by 9,6%. This was at top end of guidance, Vodacom said.
An interim dividend of 395c/share was declared. — (c) 2013 NewsCentral Media
