The Independent Communications Authority of SA (ICASA) claims the cost of making a prepaid cellular call in SA dropped 24% in two years, thanks to interconnect reductions.
However, mobile termination rates only started coming down about 18 months ago. In 2010, ICASA decreed that cellular interconnect costs had to drop to 73c at peak and 65c during off-peak times, from March 2011.
This year, rates dropped to 56c and 52c, respectively. By March 2013, wholesale mobile terminations rates will drop to 40c, regardless of the time the call is made.
In a statement, the regulator says the introduction of its March 2010 Call Termination Rate Regulations led to the cost of prepaid mobile voice calls dropping 24%, between June 2010 and June 2012, from R1.37 to R1.04.
"The 24% drop in the costs for prepaid mobile voice calls clearly demonstrates that the benefits of the reduction in termination rates has led to a direct benefit to end-users and particularly the prepaid market, the majority of mobile phone users," says ICASA.
Interconnection fees are those that operators pay each other to terminate calls across networks. ICASA says a high termination rate keeps off-net retail prices high.
Other factors
The regulator adds that the introduction of one-rate packages across networks in 2010, new tariff plans launched early this year, and an increase in the number of benefits through promotions after lower termination rates "indicate an increasingly competitive retail market and lower retail prices".
ICASA explains that the actual call cost is not the advertised - or headline - tariff, but includes a combination of bonus free minutes and other promotions, as well as those calls for which the end-user actually pays.
Ovum's emerging markets analyst, Richard Hurst, says although interconnect reductions are an enabler, it affects the wholesale price of a call, and does not directly filter through to retail costs.
Hurst says, although termination does affect the end cost, this charge is not a straight cause and effect for the price the end-user pays. "There are other factors at play here in the ever so gentle price war that we are having."
In May, Cell C sparked a so-called price war when it cut the cost of per-minute calls to 99c for both off net and peak calls on a per second basis.
Trends in effective tariffs for a prepaid mobile voice calls
Jun 2010 | Dec 2010 | Jun 2011 | Dec 2011 | Jun 2012 | |
Total prepaid revenue (R millions) | 12712 | 14399 | 13987 | 15371 | 15047 |
Total prepaid minutes (millions) | 10572 | 14100 | 14252 | 16935 | 16458 |
Effective tariff | 1.20 | 1.02 | 0.98 | 0.91 | 0.91 |
Effective VAT including cost to the consumer | 1.37 | 1.16 | 1.12 | 1.03 | 1.04 |
Source: MTN, Cell C and Vodacom data calculated by ICASA
* The effective tariff is calculated by comparing total revenue to total traffic volumes for a given period of time. The figures indicate the industry trend in the effective tariff for a mobile prepaid voice call on a six-monthly basis from January 2010 to June 2012.
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