Industry regulator, the Independent Communications Authority of SA, needs to be cautious in how it manages mobile interconnect rates to ensure that local telecommunications operators continue to invest billions of rand every year in new infrastructure.
That’s the view of MTN Group president and CEO Phuthuma Nhleko, who says it is “simplistic” to compare interconnect rates in SA with those in other countries. Interconnect rates, also known as termination rates, are the fees the mobile operators charge other telecoms providers to route calls over their networks. Political pressure is mounting for the rates to come down — they are set at R1,25/minute during peak calling times.
“People tend to look at the tariffs in country A and compare them with the tariffs in country B and ask why there’s a difference,” Nhleko says. “But there are many elements and factors that go into it.
“For instance, most of our capital expenditure is in dollars so the value of the rand has an impact. Also, the cost of your network varies depending on if you are in a country with a large population and very high population density or covering wider areas with a sparser population,” he says.
“People forget that SA has a telephone penetration of 103%,” Nhleko adds. “That’s happened because the operators have been prepared to invest billions of rand every year to roll out their networks. If you look at other emerging markets, not many have achieved penetration rate of 103%.
“Part of the reason we could get that penetration was because the tariff is well balanced for what it is costing us.”
Nhleko says it is unfair to compare termination rates in SA with those of Namibia. The Namibian telecoms regulator recently forced down termination rates to $N0,60/minute from $1,06, with plans to reduce them to $0,30 within 18 months.
“To compare the Namibian configuration with the SA configuration doesn’t work,” Nhleko says. “You have a high concentration of people in Windhoek, and a high concentration of people in Walvis Bay and Swakopmund. You have a completely different set of parameters at play, which talks to my point about the simplicity of the arguments. We need a proper engagement here.”
When asked whether he thinks termination rates should come down and, if so, to what level, all Nhleko will say is: “I don’t want to commit myself to anything. We need to do these things in a way that ensures the sector continues to make huge investments in the country but that also gives government and the regulator comfort that it’s an equitable arrangement.” — Duncan McLeod, TechCentral