MTN and Vodacom won’t play with us.

Posted by OS GIKEN
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on Wednesday, 02 March 2011
in Digital Blogs


Tonight, marks the second year of the mandate from ICASA that basically enforces rate cuts from Mobile operators in our country. This means the rate at which they charge each other for the use of each others’ lines will drop tonight at 12.


This would, to the normal person, mean that call charges to the consumer who uses their lines would automatically drop! No, shoot yourself for being so forward thinking and naïve at the same time. MTN and Vodacom have come out all guns blazing by refusing to cut costs to the consumer, even though their operating costs, so to say, are now going to be less! No, according to MTN’s speaking head honcho, MTN loses R200m when 10% termination rates are applied, thus they cannot pass on this perceived company saving to their millions of subscribers!


In real simple terms, Icasa has now made it cheaper for the operators to do business, the whole point of this intervention by the regulatory body is to make calls cheaper for us…and in return, the operators plead the 5th and throw in all kinds of reasons why it cannot happen. Why then, if we don’t see a drop in call/data charges, does Icasa not scrap this exercise altogether?


You can read the whole story here, but this got me thinking…and that’s dangerous in its own right. If MTN get cut deep by R200m profits, how much money are they really making…why not then cut profits and spare us some cash…the people who make all this possible? That’s not, operating costs…that’s profit! Almost a quarter billie!


With the new consumer act coming into effect at the end of this month, contracts will be seriously revised with new clauses that are in Times New Roman with a font size of 1…We can have the power, the option, to cancel contracts at our peril, freedom will truly be the biggest thing MTN and Vodacom has to worry about. I don’t for one second believe Boorman when he gives this, unprophetic reason why rates cannot be cut…we’ll have to wait until they release their figures to the public to see how much they saved!




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Richard Boorman
Richard Boorman
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Richard Boorman Thursday, 03 March 2011

I'm afraid that you've got the wrong end of the stick on this one. Vodacom receives more in interconnect fees from other companies than it pays out to these companies. Interconnect fees are therefore a source of net revenue. When the interconnect fees come down, as they just did, Vodacom's revenue is reduced. There are no savings to pass on to customers for Vodacom - the exact opposite is true.

The interesting question is if Vodacom's profits are reduced, who has benefitted from the cut and did they use this benefit to reduce their rates?

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barrmar Wednesday, 02 March 2011

ICASA ordered the cut in the termination rates to cut the cost to the consumer. The Cell phone companies are in it to get as rich as they possibly can, and South Africa has provided an environment that allows them to charge extremely high prices for their poor service.
The margins of these companies are huge. They are not interested in cutting profits! Besides, if the price of cell phone calls is cut, the number of calls will grow! The networks wouldn't cope! They would have to spend to increase capacity.
Interestingly, MTN's strategy and values does not include customer service. Why am I not surprised?

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