Vodacom Group Ltd., South Africa’s largest wireless operator, fell the most in more than three months after the telecommunications regulator halved mobile termination rates for carriers.
The company’s shares declined as much as 6.6 percent, the most since June 24, and traded 6.4 percent lower at 115.78 rand as of 3:30 p.m. in Johannesburg. More than 3.5 million shares traded, almost twice the three month daily average. MTN Group Ltd., Vodacom’s nearest competitor, was down 3.7 percent, its biggest fall in more than a month.
The fee mobile phone companies pay each other to end calls on another network will drop to 20 cents ($0.02) from March 2014, half the current price, the Independent Communications Authority of South Africa said in an Oct. 4 statement on its website. It will then fall by 5 cents in each of the following two years.
“The market is seeing it as ICASA’s intention to drive prices down, so obviously there’ll be pricing pressure” on market leaders Vodacom and MTN, BPI Capital Africa Pty Ltd. analyst Kate Turner-Smith said by phone. “The majority of the calls that are made from a Vodacom or a MTN network are either onto the same network or onto the bigger rival, so as much as the interconnect rate will affect their revenue, it will also improve their cost base.”
The authority last revised call termination rates in 2010 after ruling the market was uncompetitive. Vodacom and MTN dominate the mobile industry in South Africa with a combined share of about 84 percent, according to a report by Deloitte Digital published in February.
Closely-held Cell C Pty Ltd. is the third-biggest operator with a 14 percent market share. The yield on the company’s dollar bond due in July 2015 climbed 249 basis points to 11.71 percent, the highest in a month.
“It has blasted the way open by drastically reducing the single largest cost factor in prices, namely the mobile termination rates which both Vodacom and MTN enjoy,” Cell C Chief Executive Officer Alan Knott-Craig said in an e-mailed statement. “This is but the first regulatory step in normalising the South Africa telecommunications space.”
Lower termination rates are designed to benefit smaller mobile-phone companies as they will pay less to access the much larger networks operated by MTN and Vodacom. Fixed-line operator Telkom SA SOC Ltd., which said on its website its Telkom Mobile unit has a 2.2 percent market share, gained 6 percent to 26.74 rand.
“MTN will closely examine the contents of the proposed regulations and analyze its potential regulatory and economic impact,” Fusi Mokoena, acting chief corporate service officer of MTN South Africa, said by e-mail. “Once MTN has reviewed the document, it will compile its response and file the required submission on the due date.”
Vodacom also is studying the proposed changes and will comment at a later date, spokesman Richard Boorman said in an e-mailed statement.