Johannesburg - Cellular giant MTN said on Monday it has struck an agreement with competitors Cell C and Vodacom to implement a reduced interconnection rate on March 1 following Icasa's rejection of a phased-in reduction plan.

Interconnect rates are the fees levied by networks to carry traffic on each others' behalves. The Independent Communications Authority of South Africa and department of communications have placed pressure on cellular service providers to reduce their rates as soon as possible.

Robert Madzonga, acting chief corporate services officer at MTN South Africa, said that his company has struck deals with Vodacom and Cell C for an initial reduction.

"MTN has finalised separate amended interconnection agreements with Vodacom and Cell C regarding the implementation of the Mobile Termination Rate (MTR) decrease from the current 125c to 89c per minute," he said.

"The agreements will be lodged with Icasa pending the secured signatures. This voluntary industry reduction will be implemented on March a 2010," Madzonga said.

ICT analyst at Frost & Sullivan Spiwe Chireka said there is no consensus on what mobile interconnect rates should be as it is difficult to quantify the costs that networks incur by carrying interconnect traffic.

Will Hahn, a telecommunications analyst at Gartner in the USA said that it is uncertain whether a reduction in interconnect would lead to savings for South African consumers.

"The key thing that's missing is a clear commitment to flow through any of those cuts down to the end user. I haven't heard Icasa demand it and I haven't heard MTN or Vodacom commit to it," said Hahn.

"Interconnection is incredibly difficult stuff. But it's cart before the horse here. What usually happens is that a regulator comes out with an enormous, weighty study that indicates what interconnection costs for a network and why," he continued.

Hahn said that in developed markets the networks are usually allowed to make small profits on top of those costs, but that in South Africa no study has been done on the actual costs of interconnect, which makes it difficult to quantify what they should be.

- Fin24.com