Business

Report damns mobile operators' price hike claims

Lynley Donnelly

Mobile operators' claims that reducing inter-connection fees between networks would hurt their businesses, and hike prices for consumers are false.

Mobile operators' claims that reducing inter-connection fees between networks would hurt their businesses and hike prices for consumers, are false. (AP)

Research published in a policy brief by Research ICT Africa, and presented by executive director Alison Gillwald, was heard during public hearings on the cost of communications in South Africa, currently held by Parliament's portfolio committee on communications.

While the costs of prepaid mobile call rates had recently started to decline, certain mobile operators were not passing the full benefits of lower interconnection fees, namely mobile termination rates (MTR), on to consumers argued Gilwald.

This was despite the net profits from interconnections fees rising in the hundreds of million for certain mobile operators, according to the research. In addition, overall operating profit margins for the country's largest players had grown during an otherwise gloomy economic period, noted Gilwald.

South Africa still has some of the highest mobile charges on the continent. The Organisation for Economic Cooperation and Development (OECD) ranked it 33rd for the cheapest product offered by the dominant operator, and 19th for the cheapest product in the country, it said in the policy brief.

The Independent Communications Authority of South Africa (Icasa) introduced a glide path of declining mobile termination rates, starting in 2010. It was aimed at increasing competition in the telecommunications market and driving down costs. The most recent drop in the rate was seen in March this year, falling to 56c during peak time, and 52c during off peak hours. This is set to fall again in March 2013 to 40c for both peak and off peak calls.

The MTR reductions, however, have been too small to realise the same fall in prices seen in other countries such as Namibia, Ghana and Kenya according to Research ICT Africa.

It found that between 2011 and 2012 Vodacom increased the company's interconnect net profits by R66-million, despite the drop in rates. In the case of MTN it found that net profit from termination was R741-million.

The dominant operators had been able to withstand short-term pricing pressures because the MTR reductions had been too small to allow marginal and late entrants to sufficiently undercut incumbent operator prices, it said in the policy brief. This includes efforts by the likes of Cell C, which slashed its call rates to 99c per minute earlier this year.  

A presentation made by the department of communications echoed Research ICT Africa's findings.

Despite the hope that lower interconnection fees would see rapid declines in prices, mobile call rates remained relatively high, particularly for the two major network operators, MTN and Vodacom, said Themba Phiri deputy director general for ICT policy and strategy at the department.

"Our observation is that the two major operators are most resistant in passing the MTR price reductions to consumers and are mainly responsible for the high mobile voice prices in South Africa," he said.

There was a need for "radical policy interventions" to address these challenges he noted.

These could include the imposition of a flat rate regime on mobile voice calls in South Africa; the standardisation of national roaming retail prices for mobile services; and the regulation of transparency in the pricing and publication of mobile retail prices.

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