Mobile operator Cell C does not believe new call termination regulations that aim to cut voice communication costs and give smaller players a leg up will actually work, arguing that the move will favour Vodacom and MTN.
Operators have previously made a lot of money charging for calls between networks. But new rules from the Independent Communications Authority of SA (Icasa), announced in March, could see call termination rates halved over the next year.
Icasa, which intends to enforce the new rules from July, says this is one of a set of measures to reduce the cost of communicating.
However, Cell C CEO Jorge Mendes told Business Day the new rules are likely to further entrench Vodacom and MTN’s position as the two biggest mobile operators.
“We are almost certain that if this regulation gets passed and asymmetry gets taken away and it becomes level, you will not see a price reduction at all by the two bigger players. It will simply be an improvement of margins and therefore you have weakened the market in terms of [the] competition landscape,” Mendes said.
The large mobile operators now charge 9c per minute to terminate a call on another operator’s network. Icasa says this will be reduced to 7c in July and to 4c a minute in July 2025. Small players now charge 13c a minute, which is set to go down to 9c, then 4c by July 2025.
SA’s fourth-largest operator wants the price difference or asymmetry between large and small operators to remain, albeit at a lower rate. Cell C argues that making these rates the same would improve margins for larger operators that have to terminate proportionally fewer calls on another network, thereby favouring them.
Given Cell C’s market share of about 10%, a customer making a phone call is gong to land on another Cell C customer 10% of the time, 90% on another. For the 90% of the time that a Cell C customer phones another network, that is a 9c cost that Cell C has to pay.
“What we can offer for Cell C to Cell C is great, but I can only offer that to 10% of the market,” said Mendes.
“When a Vodacom customer makes a call to another Vodacom [customer], they can offer a for-free rate, because they’ve got no interconnect cost. And that’s going to happen for 50% of the time given their market share. So they can have Vodacom-to-Vodacom calls at substantially better rates than we can. So they will only have to pay 13c a call for 10%.”
While voice revenue has been in decline across the industry as people make more calls via the internet using data, Cell C still sees this bit of business as large enough to protect.
Mendes said 53% of Cell C’s active customers are still using the service, making the revenue that comes from it significant. “This kind of thing would remove north of R200m in revenues from a player like Cell C.”
Icasa will hear submissions from various operators on its draft regulations this week.
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