Consumers could soon reap the benefits after cellphone network providers dropped termination rates thanks to a high court ruling earlier this year.
Consumers may already be reaping the benefits of cheaper prepaid call rates after the recent introduction of a new mobile termination rate (MTR), but these savings are unlikely to filter through any time soon to business owners on cellphone contracts.
The new termination rates, which are the fees operators pay each other to carry calls on their networks, were announced by the Independent Communications Authority of South Africa (Icasa) in April.
The new termination rates require Vodacom and MTN to drop their termination rate from 40c to 20c. Cell C and Telkom Mobile, however, are allowed to charge the two mobile giants up to 44c to terminate calls on their networks.
Dobek Pater, managing director at Africa Analysis, says it will take some time before tariffs for post-paid offerings, which are normally more important in the enterprise market, decline.
This could be more as a result of competitive market forces than the termination rate reduction.
“I do not think that either MTN nor Vodacom will lower post-paid tariffs unless Cell C does so first, or Telkom Mobile. I also don’t think that Cell C will lower its post-paid tariffs on account of the MTR reduction as it probably would rather retain the additional net revenue from the MTR payments and reinvest it in its network or use it to settle some of the debt maturing in 2015,” says Pater.
Steven Ambrose, chief executive of telecommunications consultancy, Strategy Worx, also points out that business owners who are on contracts will not benefit from savings associated with the new termination rates.
“Consumers and small businesses on contracts will possibly see new rates later in the year as the MTR’s become clear and the competition between the operators intensifies,” says Ambrose. In an attempt to assert themselves on the industry in the wake of the new termination rates, cellphone operators have engaged in a price war on their prepaid offerings.
Vodacom took a bold move on call rates with an announcement of a lower per minute rate than both MTN and Cell C.
The company announced a new promotional bundle of 50c per minute on its Chat for 20 offering which gives customers 20 voice minutes for R10.
The promotion runs until July 14 and is available to prepaid customers.
Cell C responded by reducing its call rate to 66c per minute for prepaid customers. The rate will be valid until 30 September.
However, MTN’s recently announced 79c per minute call rate is, unlike Vodacom’s and Cell C’s promotional offerings, a permanent rate adjustment.The termination rate reductions are skewed to allow operators that have a limited share of the market – namely Cell C and Telkom Mobile – the opportunity to be more aggressive on pricing than major players Vodacom and MTN. Icasa has until October to review the termination rate process and “regulate within the confines of the law”. This, after the Johannesburg High Court ruled in favour of an application submitted by Vodacom and MTN for an interdict and review of the regulator’s new rates, which they felt were not objectively reached.