Policy Brief 1, 2015
Mobile termination rates no longer pose an obstacle to competition. Cell C and Telkom Mobile have continued to place pressure on MTN and Vodacom to reduce their prices, even at the new higher rate of 20c.
Despite being less favourable to the smaller operators than those introduced in March last year by ICASA, the latest mobile termination rate (MTR) of 20c set following the legal review still allows Cell C and Telkom Mobile to compete with MTN and Vodacom’s on-net prices. The termination rate asymmetry, though much lower than previously proposed, gives Vodacom and MTN good reason to charge more for off-net calls than for on-net calls.
The short-term cash flow benefit for Cell C and Telkom Mobile is unlikely to be significant. Revenue is a function of price multiplied by quantity. The asymmetry may result in higher off-net prices and thus lower off-net call volumes, and not more termination rate revenues as desired by the smaller operators. Vodacom and MTN can increase off-net prices for their dynamic pricing products (MTN Zone and Yebo 4 less) by giving fewer discounts.
ICASA would need to conduct a detailed traffic and effective price analysis to assess the impact of this regulation. Generally, the 20c mobile termination rate for Vodacom and MTN is at about the cost of an efficient operator, and mobile termination rates no longer pose an obstacle to competition. Voice prices are likely to settle at lower levels in 2015.
