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Although the mobile termination rate (MTR) battle came to a head last year and saw final regulationsaround the inter-network fees published, the matter has still not entirely been put to bed, with international termination rates (ITR) another bane for SA’s operators.
Globally, mobile operators are becoming increasingly protective over their bottom lines in the wake of dwindling voice revenue and the so-called over-the-top threat. Locally, networks also bemoan the added burden of lower MTRs introduced by the Independent Communications Authority of SA (ICASA) towards the end of last year.
Both Vodacom and MTN have said their bottom lines have suffered since the introduction of the new rates. In November, Vodacom CEO Shameel Joosub said he expects MTRs to cost the company as much as R1.8 billion over the full year, with a net effect of R1 billion.
On the international front, SA’s operators claim they are paying far more to terminate calls on other carriers’ networks than the amount they are permitted to charge for inbound international calls.
ICASA maintains call termination regulations make no distinction between termination services for voice calls originating from within and outside SA’s borders, and has already taken MTN to task for unilaterally deciding to charge 25 US cents (about R3) for cross-border inbound calls.
MTN has been ordered to stop charging the rate – an increase of around 1 480% on its fee for local inbound calls – but says it is considering its alternatives and has indicated it wants to engage with ICASA on the matter.
Graham de Vries, executive of corporate services at MTN SA, argues many of the operator’s international carrier partners charge ITRs that are “significantly more” than the rate of 25 US cents, as charged by MTN prior to the decision taken by ICASA.
ITWeb understands that up to 80% of MTN’s outbound international traffic terminates in Southern African Development Community (SADC) countries, and the company could be carrying a R400 million loss because of this.
De Vries did not confirm numbers, but says a “significant portion” of MTN’s outbound international traffic terminates in SADC countries. “The majority of international carrier partners that deliver international calls for operators in those countries do charge higher international tariff rates in comparison to the 20c MTN is allowed to charge for the reciprocal service.”
He says this means the ITRs these international carriers are charging severely tilts pricing in favour of international carriers. “MTN continues to engage with ICASA in an attempt to bring into balance the significant outflows of money from SA.”
SA’s largest mobile operator by customer numbers – but with a significantly smaller African presence than rival MTN – Vodacom says the differential between lower SA termination rates and higher termination rates in other countries results in “significant net revenue outflow”.
Vodacom spokesman Richard Boorman says this outflow “in no way” benefits local consumers, local networks, or SA as a whole, as it results in lost taxes and unfavourable foreign exchange flows.
The Internet Service Providers’ Association (ISPA) has argued that MTN’s move to charge a much higher rate for international inbound calls does affect local users, by virtue of the fact that their friends, family members and business associates overseas bear the cost.
Cell C, which in January asked the South Gauteng High Court to review ICASA’s latest decision on termination rates (which saw its asymmetry advantage curtailed) says it charges 31c to all interconnecting parties.
However, Graham Mackinnon, Cell C’s chief legal officer says, in some cases – especially from certain African countries – the outgoing charges are much higher than this. “Prices vary significantly and the exchange rate has a large impact on our costs.”
Mackinnon says some countries, mostly in Africa, have introduced a surtax on incoming international calls to boost government revenue. “Unfortunately, we have seen call volumes drop significantly to those destinations due to the higher cost to our customers as a result.”
ISPA regulatory advisor Dominic Cull says, on the basis of the fact that ICASA did analysis to determine the latest rates and regulations, “we would assume [the authority] left SA’s operators some margin when it comes to the cross-border termination rates they are charged”.
ICASA says it is aware of the view that operators should be able to differentiate international termination rates, but says its position that the regulations do not allow for this stands.