South Africa - ICT Trends and Development

[doc] It is estimated that Vodacom, Cell C and MTN will together lose R1 billion a year in revenue once the new peak interconnection rate is implemented by March 2010 while Telkom will save R1 billion annually. The possible benefits from an increased subscriber based and increased usage due to lower tariffs is yet to be determined.

The peak mobile interconnection rate will be reduced from R1.25 cents per minute to 89 cents per minute. The reduction is expected to stimulate competition. A lower interconnection rate will reduce the barrier to entry for smaller players in the sector. It is also anticipated that operators will introduce innovative products at an affordable rate to keep and increase their subscribers.

Besides the traffic differential, the main issue is the difference between mobile peak termination rate of R1.25 and the Telkom’s peak termination rate of around 25 cents.

Telkom paid the three mobile operators R5.4 billion in interconnection fees during its last financial year, of that, R3 billion was paid to Vodacom and the rest was split between MTN and Cell C. In other developments within the industry ICASA is expected to pronounce on the desired interconnection rate based on the outcomes of their market study, by June 2010.

Since the reduction of interconnection rates is expected to be implemented on a glide path covering a few years, South Africa’s rates will continue to be fairly high, but not the highest. Over time, the interconnection rates will be more in line with global interconnection rates and the benefits will be more visible. To ensure that consumers are not short-changed since the tariffs charged to them are not regulated, the Department of Communications is proposing to establish a consumer tariffs advisory council that would monitor telecoms tariffs.

ICT
Trends and Development - January 2010 Policy Bulletin