Vodacom and MTN set to lose big in new call pricing

Tech Financials

The shares of both Vodacom and MTN Group – the country’s largest mobile phone operators – dropped more than 4% each after the communications regulator disclosed final termination rates. Now what is both Vodacom and MTN – incumbent cellphone operators – planning to do?

The news sent the incumbents shares spiralling down, while they are still contemplating a way forward, and Communications Minister Yunus Carrim pleaded with the incumbents to accept the final terminations rates.

Communications regulator ICASA announced this morning that both Vodacom and MTN are expected to reduce their Mobile Termination Rate (MTR) from 40c today to 20c as of 1 March 2014. The MTR’s for small mobile operators like Cell C and Telkom Mobile will remain at 44c. The fixed termination rate for Telkom remains at 12c in respect of local interconnection for the coming year, while the rate for the national interconnections will fall from 19c to 16c. By March 2017, the call termination rates for the major operators will be unified at 10c, with continued, albeit falling, asymmetry for small mobile and fixed operators.

Investors fear that both MTN and Vodacom will be affected by the new rates, which will hit their revenue generation.

The country’s biggest mobile phone operator by subscribers Vodacom dropped 4.4% to R116.95 pushing its market value to R174bn compared to R182bn on Tuesday. MTN, the second-biggest cellphone operator by customers, lost 4.2% to R196.50, reducing its market value to R368bn from R384bn.

Vodacom seems to be contemplating taking ICASA to court to review the final terminations rates.

“We will consider our options in order to do our best to protect our customers and ensure that South Africa continues to get the network investment that it needs and deserves,” argues Vodacom CEO, Shameel Joosub.

His counterpart at MTN South Africa, Zunaid Bulbulia, also seems likely to follow the same route. “MTN does not support the proposed mobile asymmetrical rates (i.e. competitive cross-subsidies) and believe these to be unsubstantiated. MTN will also have to scrutinise and consider a number of other due process concerns once the regulation is published. In this regard, MTN is considering all its options.”

This piece was lifted with permission from Tech Financials

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  • Whats really wrong with both Vodacom and MTN they have made billions of rands from us that has allowed them to invest in Africa and Middle East. They should realise the party is over. The party to generate billions and declare fat dividends for shareholders. We as customers have been subsidising their shareholders for too long and now we deserve lower prices. This will help us the poor and the unemployed to access the Internet and be able create their on jobs online. Lets hope the South African courts rule in favour of the consumer

  • I suggested to sell my shares @150 per share yesterday and what will happen because the market price is less than what I wanted and I need money very urgent

  • This is another blow for MTN Zakhele shareholders who have recently breathed a sigh of relief after the lifting of a trading suspension that lasted 2 full months.The announcement by the communication regulator coul`nt have occurred at a worst time This new development means that MTN will be less profitable and in the process make less profit which may result in little or no dividends than what was originally expected. It is a well known fact that MTN Zakhele still has to pay off a loan to the tune of R4 billion if I`m not mistaken. If MTN cannot make reasonable profits payment of the loan will be severely curtailed. In 3 years time the scheme has to attain maturity and problems will arise if the loan is not completely paid off. MTN Zakhele shareholders should be very careful and refrain from taking rash decisions after all they have successfully seen their original investment appreciate by more than 300% so far & they still stand to make even more if everything goes well. I hope that the powers that be will deem it necessary to be completely transparent & take their shareholders into their confidence in order to allay any possible fears after this announcement by the communication authority.

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