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MTN is not a greedy monster - CEO

Cape Town - The legal battle by MTN [JSE:MTN] against the Independent Communications Authority of SA (Icasa) about the regulator's cheaper call rates should not be construed as an attempt to keep the costs of telecommunications high, according to CEO Zunaid Bulbulia.

"There is a common goal in the industry to reduce costs and to promote fair competition. Both are good for our customers and for our business," he said in a statement on Friday.

Icasa published regulations which include a 50% cut in Mobile Termination Rates (MTRs). These are the fees that operators charge each other to carry calls between their networks.

The communications regulator wants mobile termination rates to be cut from the 40 cents to 20 cents with effect from March 1 2014.

For fixed lines, call rates will drop to 12c for short-distance calls and 16c for long-distance calls.

In addition, Icasa has also introduced an asymmetric system in a bid to help smaller operators grow.  

This means bigger operators would pay 44c a minute to carry calls to smaller operators, while smaller operators would pay 20c a minute to their bigger rivals.

MTN said that regulation of this kind is sometimes necessary, but only if due process is followed.

"MTN believes that the decline in MTRs must be driven by a fair process and an appropriate costing study to ensure MTRs are reflective of the costs incurred by all players in the market, including smaller players."

The regulations by Icasa fall short of these requirements, alleges MTN and therefore it instituted legal proceedings against the communications regulator.

It has filed an application at the South Gauteng High Court in Johannesburg, seeking an urgent interim order to stop the MTRs from coming into effect until the legal process has been fully exhausted.

"MTN has asked the court to review what has happened and to set aside those parts of the regulations which it finds irregular."

MTN said this is a right that is afforded to all companies regulated by Icasa.

Strategy Works CEO Steven Ambrose said, in his view, the main bone of contention is the significant asymmetry awarded to smaller operators.

“The result of this would be a net cash flow of R1bn from the larger networks to the smaller ones in the initial year of the new termination regime.

"This amount is too significant for the larger networks to ignore,” he said.  

Ambrose said MTN's legal challenge is a game changing step and has the potential to delay MTR and asymmetry for years to come.

Consumers will maintain that they have been ripped off for far too long and the reaction to MTN’s court action will be negative for the networks, he said.

He said the principle of reducing termination rates is sound and should be encouraged by all participants, but he also took a swipe at Icasa.

“It is Strategy Worx’s contention that the Icasa termination rates announcement was hasty and poorly considered."

Given that asymmetric rates represent a major distortion of the market, any intervention should be carefully considered and with consultation, Ambrose said.

There is also speculation that Vodacom [JSE:VOD] would institute a legal challenge against Icasa, but no papers have yet been served.

 - Fin24

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