The South African mobile phone industry is set for a bitter legal battle with market leaders, Vodacom and MTN, looking to repel a potentially damaging attack by the third largest operator Cell C.
Cell C is going for the kill in its march to capture market share from the market leaders. It is alleging that MTN and Vodacom are engaged in uncompetitive behaviour and has lodged a complaint with the Competition Commission.
In a statement released yesterday, Cell C said “The crux of the complaint relates to the manner in which the dominant incumbents discriminate between their on-net and off-net effective prices, which has a dramatic and direct impact on smaller operators’ ability to acquire new customers”.
Cell C CEO Alan Knott-Craig said “The two dominant incumbents discount their effective on-net prices substantially while charging a premium for their customers to call off-net. This amounts to discriminatory pricing and is without doubt anti-competitive when adopted by dominant operators”.
Vodacom and MTN have signalled that they are ready for war. In response to the Cell C statement Vodacom said “It’s a standard practice worldwide for companies to offer their customers lower priced calls when those calls are to other people on the same network. Cell C is apparently arguing for an increase in the price that Vodacom customers pay to call other Vodacom customers. It’s hard to argue that increasing prices would be a benefit to consumers”.
MTN was more disparaging. Zunaid Bulbulia- MTN SA CEO said “MTN notes the announcement with interest. We further note the novel arguments raised by Cell C to justify their complaint.
Added Bulbulia “We deny that there are any anti-competitive conduct as alleged. In fact, MTN is providing good value to its customers within the context of a vigorously competitive market”.
We see this as another desperate attempt to cry for further subsidies for a failing business. We believe that it is a spurious complaint and we will of course co-operate with the authorities should it be deemed necessary to argue this matter.”
The Competition Commission has acknowledged receipt of the Cell C complaints and said it cannot as yet comment on the merit of the matter as it has to study the complaint first.
Cell C’s case is pitched on a couple of clauses of Section 8 of the Competition Act which deals with excessive pricing and exclusionary behaviour.
Knott-Vraig said Cell C has been fiercely competing on all fronts with the ultimate aim of driving down prices for the consumer, which is also beneficial for Cell C. “Customers that call off-net are being penalised often without them realising it. With number portability, customers don’t always know if they are calling on- or off-net anymore, so they don’t actually know what rate they are paying.”
Cell C noted that in many mobile markets around the world, regulators are opposed to differential on-net and off-net pricing, and in some instances, dominant mobile network operators are facing stiff fines for this kind of discriminatory pricing, which locks in customers and prevents switching.
The company cited a number of examples. “At the end of 2012, the French Competition Authorities imposed a fine on Orange France and SFR for €183.1 million in total for anticompetitive practices in the mobile telephony sector, specifically for discriminatory on-net pricing”.
Papua New Guinea, in a bid to prevent market failure, introduced regulations that prevent operators from offering discriminatory off- and on-net pricing in 2013”.
Also in 2013, the Nigerian regulator called on MTN Nigeria to introduce flat rates (where on-net tariffs are the same as off-net tariffs) as 85% of MTN’s traffic is on-net in that country”.
All of these cases support Cell C’s position in its Competition Commission complaint, said the company.
Cell C move rides on the back of rising dissatisfaction on the state of South Africa’s mobile phone market And mainly pricing. Just last week the Independent Communications Authority of South Africa (Icasa), launched a proposal to slash the fees charged between operators to carry one another’ calls. The proposal, mixed with an asymmetrical dose, should give smaller operators a leg up and hopefully lead to reduced prices.