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