South Africa Communiqué
1 July 2010
Mobile operator argues bigger rivals to pay more switch rates

Mobile operator Cell C has requested the Independent Communications of South Africa (Icasa) to enforce Mobile Telephone Network (MTN) and Vodacom to pay a high interconnection rate to smaller operators like itself to help grow their business. Cell C proposes that smaller operators pay 65c to operators that the regulator declare to have significant market power, while companies with such market power pay 75c to smaller operators. These are referred to as asymmetric mobile termination rates.

Asymmetry is when companies pay mobile termination rates in proportion to their market size. Lars Reichelt , the CEO of Cell C, said during hearings on 30 June 2010 the proposed interconnection rate, “asymmetry is an effective mechanism to increase the level of competition”.   Cell C, which was also declared by Icasa to have significant market power has for years been asking for regulator remedies that would boost its ability to compete with MTN and Vodacom.

Mr. Reichelt said Icasa must take into account that Cell C cannot exercise market power since it was a smaller player in the market. Cell C, on its written submission said that asymmetric mobile termination rates, implemented for an interim period, would promote long-term competition in the mobile market as this would enable the company to grow its market share and become a more effective competitor.  Adding that the termination rate that was not financially feasible will cause significant harm to its investments incentives.

Meanwhile, Douglas Reed, the Managing Director of Vox Telecom, has lambasted MTN, Vodacom, Cell C, Telkom and Neotel for abusing their power saying the cellphone operators especially MTN were refusing to agree on the interconnection fee of 89c, which was implemented in March 2010 and insists on changing the old rate of R1.25c. Mr. Reed pleads to Icasa that it must clearly define the regulations to curtail abuse by the dominant players who have and would use the same regulations  to the detriment of the smaller operators.

Icasa will study the comments made before issuing the final regulations. It is uncertain that the regulator will impose this year the 65c rate.

BACKGROUND

Icasa has proposed a flat rate of 65c from 89c, the rate is expected  to be reduced to 50c 2011. Then in 2012 further reduction to 40c.

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