MTN opposes reduction in interconnection rates

MTN, Africa’s largest mobile operator, has gone to court to block the interconnection rate reduction being proposed by the Independent Communications Authority of South Africa (ICASA), in the region’s second largest telecom market.

MTN contends that the new interconnection rates proposed by ICASA will favor small operators.

According to ICASA’a proposed new rates, MTN and Vodacom would this year drop their mobile termination rates from the current R0.40 to R0.20 followed by a drop to R0.15 cents next year.

ICASA hopes that the reduction will make communication cheaper in South Africa for customers of small operators, which are paying huge sums of money in interconnection rates to larger operators.

ICASA expects that the reduction in interconnection rates will allow the small operators to achieve savings that will enable them to quickly expand their networks.

MTN has already initiated legal proceedings against the regulator to stop it from implementing the new interconnection rates. In view of the legal proceeding by MTN, ICASA has said that “the implementation on the new termination rates will be delayed until May.”

On its part, Vodacom South Africa said it also plans to go to court to block the proposed new termination rates, claiming that the company could lose up to 1 billion rand (US$92 million) in the company’s 2015 financial year.

The new interconnection rates were supposed to come into effect next month.

Interconnection refers to a commercial arrangement under which service providers connect equipment, networks and services to each other in order to allow their customers to access the networks of multiple service providers.

In Zambia, the Zambia Information and Communication Technology Authority (ZICTA), the country’s telecom sector regulator, has launched a service charter that calls for the reduction in termination rates in the country.

The interconnection rate for 2014 in Zambia has dropped to 0.20 kwacha (US$0.03) from 0.23 kwacha per minute.

Since the arrival of mobile communications in Africa almost two decades ago, mobile service providers have determined their own interconnection rates, but many African governments have taken steps to regulate the fees, which are blamed for the high cost of communications in the region.

In Zambia, Kenya, South Africa and Uganda, operators claim to have suffered a significant decline in revenue following reductions in interconnection rates that telecom regulators have been implementing.

Operators say that if the region continues to experience further declines in calling rates, massive job losses, deteriorating quality of service and loss of government revenue will be inevitable.

But Edith Mwale, a telecom analyst at the Africa Center for ICT Development said that, “even with the

lowest interconnection rates, operators are still able to make good profits. For a long time now, operators have been making huge profits but their quality of service has remained poor.”