South African New Mobile Termination Rates Ruled Unlawful

Proposals to lower the amount South African mobile-phone companies pay to connect to other carriers’ networks, while “invalid and unlawful,” will remain in place for six months, a judge ruled today.

The Independent Communications Authority of South Africa, or Icasa, said in January that so-called termination rates would be halved to 0.20 rand ($0.02) this year, with further cuts in 2015 and 2016. Johannesburg-based MTN Group Ltd. and Vodacom Group Ltd., the country’s two biggest operators, took legal action against the regulator over how it reached its conclusions, which are designed to help smaller companies.

The ruling by Judge Haseena Mayat at South Gauteng High Court in Johannesburg means that as of midnight tonight “the cost to terminate a call on a mobile network will be reduced to 20 cents and they will remain enforced for a period of six months,” Pieter Grootes, general manager for markets and competition at Icasa, told reporters. “During this period Icasa will be conducting a further review in terms of the future of termination rates in South Africa.”

Vodacom shares fell 2 percent to 129.99 rand at the close in Johannesburg, the biggest fall since Feb. 20. MTN, Africa’s biggest wireless operator, traded down 1.1 percent at 215.55 rand.

“It appears that our position has been vindicated but we’ll be studying the judgment and will respond in more detail later,” Richard Boorman, a spokesman for Vodacom, said in an interview. MTN has been “vindicated in its decision” to take the matter to court, Zunaid Bulbulia, chief executive officer for South Africa, said in a statement.

Cell C Pty Ltd., South Africa’s third-biggest mobile-phone company, said while the ruling was a “step in the right direction” the continued uncertainty would frustrate the company’s planning beyond October. Closely held Cell C’s ability to repay debt could be affected if regulators fail to cut termination rates, according to a court document dated March 11.

Telkom SA SOC Ltd. welcomed the ruling, according to a statement.