Telkom is the only operator that will get a Christmas present if interconnection rates are cut immediately, and it will use it to cross-subsidise and frustrate competitors, said Vox Telecom CEO Tony van Marken.
JSE-listed Vox Telecom, which has made a name for itself in the least-cost routing (LCR) market, was the last to present before Parliament during the marathon two-day public hearings into the interconnection rate and proposals to reduce it.
In its presentation, Vox said it did not mind a smaller immediate cut in the interconnection rate. However, it strongly recommended that a lower rate, such as Parliament's suggested 60c per minute, should be done incrementally over a longer period.
Van Marken made no bones about his company's standpoint. He emphasised that while its LCR business did stand to lose, the point was that it needed time to convert customers, and that interconnection was not the only means of reducing overall telecommunications costs.
He said Vox Telecom and other smaller players in the LCR sector had made a business out of the current regulatory regime by being more efficient and offering real savings to their clients, despite having none of the advantages of the incumbents.
“MTN, Vodacom, Telkom - all have been given significant advantages by government and the regulator [ICASA]. We have had none of these and have still made a business. So I urge you to carefully think [the decision] through,” he told the politicians.
Bonus for Telkom
Van Marken said that, if the interconnection rate was cut immediately, from 125c per minute to Parliament's proposed 60c per minute, it would be like handing Telkom a R2.4 million bonus.
On Tuesday, Telkom SA CEO Pinky Moholi admitted the country's dominant fixed-line operator had paid out R5.8 billion in interconnection fees to the mobile network operators for calls terminating on their networks.
Van Marken went on to say that, while Vox Telecom was moving away from LCR into other services, such as voice over IP and placing customers on its own network, it still depended heavily on the arbitrage opportunities presented by Telkom national rates being so expensive.
“They [Telkom] took us to court and we won. They refuse to do geographic number portability for our clients, and so they continue to try and force out challengers.”
Van Marken added that government had been a net benefactor of Telkom dividends when the fixed-line operator owned 50% of Vodacom.
“Telkom listed in 2003 and has paid out R7 billion in dividends, plus a special R10 billion dividend for the unbundling of Vodacom for a total of R17 billion,” he said. “The Department of Communications [government's shareholder representative] owns 40% of Telkom, meaning they received R6.8 billion.”
Van Marken claimed that now that government was no longer a recipient of Vodacom's dividends, it did not mind attacking the interconnect rate.
ANC MP Eric Kholwane asked how Vox Telecom takes clients away from the incumbents, while still using their networks and paying the high interconnection fee, as well as in the face of the incumbents' anti-competitive behaviour.
“It is very simple,” replied Van Marken. “We capitalise on their inefficiencies. We, and other companies like us, are efficient and we pass on the savings to our clients. We are the good guys.”
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