South Africa Regulator Further Reduces Mobile-Termination Rates

South Africa’s communications regulator lowered the cost of terminating calls on mobile networks even as the biggest wireless operators said a reduction may force them to cut jobs and curb investment.

The amount mobile-phone companies pay each other to end calls on another network will halve to 20 cents ($0.02) as of March, the authority said today, confirming a proposal made in October. Mobile termination rates will fall to 15 cents from March 1, 2015, and to 10 cents a year later, it said.

“Regulating in the public interest means the will and commitment to aggregate differing and sometimes conflicting societal interest, and to ensure that the public interest prevails at the end of the day,” Independent Communications Authority of South Africa Acting Chairperson Nomvuyiso Batyi told reporters in Johannesburg today.

South Africa’s biggest wireless operators, MTN Group Ltd. (MTN) and Vodacom Group Ltd. (VOD), had sought to negotiate with the regulator, arguing that rates should be reduced more gradually. The Johannesburg-based companies said Oct. 9 that if a compromise wasn’t agreed they may curb spending and cut staff. Lower mobile termination rates mean they would receive less from smaller players when their customers receive calls from other network users.

Vodacom shares fell 1.3 percent to 120.71 rand as of 11:34 a.m. in Johannesburg, while and MTN declined 2.1 percent. Neither company was immediately available for comment.

Largest Impact

“Vodacom as a group is likely to experience the largest impact because of its superior market share position and reliance on South Africa,” BPI Capital Africa analyst Kate Turner-Smith said by e-mail. “The effect on MTN will be smaller because South Africa is a smaller contributor to the group.”

Vodacom’s market share in South Africa is about 43 percent and MTN’s 37 percent, according to Turner-Smith. Vodacom generates about 80 percent of sales from South Africa.

The regulator has also reduced so-called asymmetry fees, which help smaller competitors including Telkom SA SOC Ltd. (TKG)’s mobile unit and Cell C Pty Ltd., by charging them less to use the larger networks of Vodacom and MTN.

The maximum asymmetry rate will be 44 cents in 2014 and will reduce by two cents a year until March 2017 when the rate will halve to 20 cents, according to ICASA.

To contact the reporter on this story: Christopher Spillane in Johannesburg at cspillane3@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.