Uncategorized 1.4.2014 06:56 am

MTN, Vodacom win hollow victory

Picture: AFP

Picture: AFP

MTN and Vodacom have scored a hollow victory in the South Gauteng High Court where Judge Haseena Mayat has ruled the sector’s new interconnection rates are unlawful and invalid, but the order has been suspended for six months.

This means the two cellphone giants will have to drop the interconnection rates they charge CellC and Telkom Mobile by 50% to 20c per minute on April 1 while paying the other two networks 44c for the same service.

Interconnection fees are the fees cellphone companies charge competitors to allow them to access their networks.

The Independent Communications Authority of SA (Icasa) earlier this year set the cat among the pigeons when it ordered a drastic scaling back of interconnection, or cancellation , fees, but said

Vodacom and MTN would have to reduce their fees faster than relative minnows CellC and Vodacom.

Judge Haseena Mayat said the decision by Icasa to go ahead with the rates was irrational and unlawful on various grounds.

Vodacom and MTN said Icasa had made the decision arbitrarily, without proper investigation into cost structures and the effects on the service providers operations.

They also claimed they were being discriminated against because the constitution provided for equal treatment. However, Icasa shot back that the asymmetric application of the rates was meant to stimulate competition in the sector, to provide some measure of protection for 8ta and CellC as the big two had also been nurtured in their formative years.

It was also ordering the reductions to bring down prices for consumers.

CellC and Icasa pointed out while Vodacom and MTN had argued Icasa had not “shown them the numbers”, the calculations and figures used to come to its price-reduction schedule, the two giants had not opened their books for inspection either.

Yesterday’s order will be suspended for six months to give Icasa an opportunity to consider the complex economic arguments at stake. Judge Mayat said there was hardly any dispute to the argument that the rate of 20c is above cost and therefore Vodacom and MTN would suffer little prejudice.

Richard Boorman, spokesperson for Vodacom, said Vodacom would have to study the full judgement before it could comment further.

Vodacom earlier argued that it could lose R1bn in annual revenue if the new tariffs were applied. Asked whether that means the application of the tariffs during the six months suspension of the order would cost the operator half of that, he said: “I don’t think one could necessarily come to that conclusion, but we will have to study the judgement to get an idea of the impact.”

MTN earlier said it could lose R450m in revenue in six months of the tariffs went ahead.

 

 

 

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