The move by MTN to launch a legal challenge to ICASA’s newly-announced mobile termination rates, which have now been put on hold, has been met with criticism from parts of the market.
Jose Dos Santos, acting-CEO of Cell C, has submitted a scathing indictment on the MTN action.
“Dominant incumbents are typically defensive when any attempt is made to curb their otherwise abusive behaviour, but isn’t MTN taking it a bit far?” he writes.
Dos Santos points to ResearchICT Africa studies that have repeatedly shown that prices to communicate in South Africa are abnormally high.
“MTN not only holds more than 35% of the entire mobile market by revenue in South Africa, but holds significant shares in international operations throughout Africa and the Middle East,” he writes. “Operating under regulatory scrutiny is therefore nothing new for MTN, but it seems that where that regulation is not to MTN’s liking, it opts for the courts rather than a good hard look at its operating model.”
Dos Santos recalls that, in 2010 when ICASA first intervened in the market to help drive prices down, MTN argued that it would have to cut jobs and its business would be prejudiced by the reductions in the rates that operators charge one another to terminate calls.
“Over the three-year period that those regulations were in place, MTN increased its EBITDA margins year on year until 2013, when EBITDA dropped by approximately 2% in the first half of 2013.”
In its court papers, MTN submits that ICASA has failed to follow due process in determining termination rates, and argues that asymmetry effective cross-subsidises Cell C and Telkom Mobile, at the expense of the larger operators (Vodacom and MTN).
The asymmetry proposed by ICASA would be in effect for a further three years, allowing smaller operators to charge more than they pay large operators to terminate calls.
“Asymmetry is a common remedy to make sure that competition is possible – in numerous countries around the world asymmetry is afforded to new entrants, operators with defective or inefficient spectrum, operators which do not have sufficient scale to compete, and for other reasons deemed to be appropriate by the relevant regulator in those markets,” Dos Santos says.
“Sufficient scale is generally regarded as 20% to 25% revenue market share. Cell C has about 9% and Telkom Mobile about 1% revenue market share.”
The real issue, he believes, is that the new rates would allow Cell C and Telkom Mobile to lower their retail prices – which MTN argues could cause permanent damage to the market.
