D-day looms for cellphone giants over fee cut
Icasa stands up to goliaths in bid to level playing field
MTN and Vodacom will tomorrow know whether they have to slash their “interconnection fees” by half — essentially cutting the cost of cellphone calls for consumers.
The two cellular goliaths argued in the South Gauteng High Court for two days this week, trying to convince Judge Haseena Mayat to halt the plan by regulator Icasa to halve the interconnection fees — from 40c to 20c — from Tuesday.
It is a crucial battle, as “interconnection fees” are essentially what the telecoms operators charge each other when calls are made over their networks — fees passed on to their customers.
While the small players, Cell C and Telkom, are in favour of these interconnection rates being slashed, MTN and Vodacom would lose out.
Judge Mayat will announce the ruling tomorrow afternoon, hours before the new fee is meant to come into effect. Icasa then plans to cut these fees more over the next two years.
It was heady stuff in court this week.
The two cellular giants effectively accused Icasa of thumbsucking the new 20c fee, but Icasa gave no ground.
Icasa’s silk-tongued advocate, David Unterhalter, said Vodacom and MTN “have done a delicate tap dance”, without revealing anything.
“They can’t tell you how their profits will be affected.
“If [they] were apprehensive that these rates were going to be below [their] costs, why didn’t [they] show us?”
Icasa’s bottom-line argument was that unless they are allowed to slash interconnection rates, consumers will suffer.
If the court agrees with the regulator, MTN and Vodacom will lose out on a handy source of extra revenue, while the small players, Cell C and Telkom Mobile, will benefit.
Last month, Vodacom CEO Shameel Joosub said his com- pany could stand to lose as much as R1-billion, thanks to the new termination rates.
In court on Thursday, MTN’s advocate, Wim Trengove, said MTN could lose R450-million in revenue if the lower interconnection fees were put in place during a review period.
On the other side of the coin, however, Cell C said that unless Icasa was allowed to cut the rates, its ability to meet its debt repayments would suffer.
Equally, Telkom Mobile had a R773-million loss in the six months to September, and is hoping a cut in the amount it has to pay to Vodacom and MTN will reverse its fortunes.
Telkom CEO Sipho Maseko said last year that smaller telecoms companies needed to stop subsidising the large cellphone operators through these hefty interconnection rates.
“We are in the water with [Olympic champion] Michael Phelps, and we’ve got to swim with lead irons on our legs,” Maseko said.
He said that Telkom had paid out R60-billion over the past seven years to cellphone companies, while getting a pittance in return.
“It’s been through Telkom subsidies that companies like Vodacom and MTN have been able to grow internationally,” Maseko said.
They had benefited unfairly, and the “unjust” relationship had to change, he said.
Icasa’s strategy to fuel competition has been to apply “assymetrical rates” — essentially asking for bigger cuts from the largest operators – Vodacom and MTN —and smaller cuts from the weakest operators, Cell C and Telkom.
So MTN and Vodacom would have to pay 44c a minute to the small operators, while the small operators would have to pay only 20c a minute.
The court case follows a messy public spat in the media.
Cell C’s acting CEO Jose dos Santos said last week that although MTN and Vodacom argued that Icasa did not take their costs into account — “despite requests from Icasa to provide their costs to calculate the appropriate price controls — MTN and Vodacom did not do so”.
Vodacom spokesman Richard Boorman said on Friday that Icasa did not ask for the longrun incremental cost-based financial model, even though that is what they applied.
‘“They didn’t ask us for the information necessary to run this kind of model,” he said. — with Bloomberg
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