Call for probe into cellphone market
• Cell C’s anticompetitive appeal dismissed • Commission to talk to Icasa about intervention
The Competition Commission has called for a wider investigation into the state of competition in the mobile phone market.
This comes after its decision to dismiss a complaint by Cell C against Vodacom and MTN for anticompetitive conduct related to on-net calls (calls between users of the same network) because of lack of evidence.
In its October 2013 complaint, Cell C alleged that Vodacom and MTN engaged in pricing strategies that made it cheaper to make on-net calls compared with calls between people on different networks.
Cell C said the price differentials applied by Vodacom and MTN prevented competition. It accused the companies of excessive pricing, inducement and margin squeeze.
MTN and Vodacom control more than 70% of the market. Cell C has struggled for more than a decade to gain traction.
There have been continuing calls for the regulator to look into the cost of communication because tariffs in SA, especially for data, are higher than in other emerging markets.
While the commission said it did not have enough evidence to proceed with the complaint, it would engage with the Independent Communications Authority of SA (Icasa) to “explore regulatory interventions that may be necessary to make the market competitive”.
Icasa spokesman Paseka Maleka said the regulator had made “serious inroads to ensure a drop” in prices, specifically wholesale voice-call tariffs.
He said the wholesale voice price, which operators pay to carry each other’s calls, had dropped from R1.25 to less than 30c and the regulator was looking at reviewing the regulations.
On data prices, Maleka said “due to changes” in the way data was being used, the emergence of new technologies and the rise of over-the-top-services such as instant messaging, Icasa was still conducting a study.
Falcon Crest Asset Managers chief investment officer Farai Mapfinya said in most markets — developed and developing — the scale differential and network effect made it challenging to sustain a market of more
than three players. In most instances only two players — and at the margin, possibly three — made money.
“It’s just the nature of the communications businesses, especially ones that require huge capital outlay and it’s not just in telecoms,” he said.
There were “natural monopolies” that were unlikely to be tackled by any form of regulation, Mapfinya said. “We think it will be difficult, if not impossible, to remove the kind of barriers to entry that exist without infringing the foundational basis of commercial enterprise.”
Cell C spokeswoman Karin Fourie said the company was “encouraged” by the commission’s acknowledgment that this pricing model made it difficult for new entrants to compete effectively and that there was a need to look at the state of competition in the mobile market generally. Cell C would monitor the activities of the dominant operators to ensure any anticompetitive conduct was taken up by the authorities, she said.