MTN calls for policy trade-off

MTN uses interconnect revenue to boost penetration as per government mandate and its licence agreement stipulates, it says.

Head of regulatory affairs, Graham de Vries, says without that income, the company will be unable to improve penetration and provide access to the lower income mobile users. “We will have to have a policy trade-off. If the interconnect fees go down, then there must be changes in what is expected from us.”

MTN is facing the Parliamentary Portfolio Committee on Communications this morning to defend its stance on interconnect fees. The committee meeting is part of two-day public hearings that end today.

At the beginning of the meeting this morning, MTN attempted to ward off any threat of being forced to divulge its costing for interconnection rates today by saying it is willing to supply the information in a confidential hearing to Parliament.

In a letter from Karel Pienaar, MD of MTN SA, that was read out by parliamentary communications committee chairman, Ismail Vadi, the network operator said: “In the light of yesterday's events, MTN would like to make it clear that it is willing to cooperate fully with Parliament and this committee.”

Pienaar said MTN will reveal whatever information is needed in a confidential briefing to the committee with the Independent Communications Authority of SA present, but without the other operators.

Vodacom took a beating yesterday when it faced an unusually united communications committee, which threatened to subpoena rate breakdowns from the company.

The mobile operators' licences come with certain stipulations enforced by the Electronic Communications Act, which include roll-out in rural areas as well as the provision of low-cost calls, known as community service telephones. MTN says the company has used the interconnect income to fund these obligations.

De Vries adds that interconnect revenues are also used to fund other forms of access, like handset subsidies and low-cost SIM cards. He says a combination of the funding areas amounts to increased penetration in the market.

The South African mobile market has an unprecedented 100% penetration level, although De Vries admits the lower income earners are still a growth point for the company.

The mobile operators are facing a hammering from three sides over the high cost of interconnect, currently at 125c during peak times. The Department of Communications has issued a policy direction to the regulator to try and get interconnect rates cut to cost by November and the committee is looking at a 60c cut before February next year. At the same time, consumers hope the cuts will be translated to cheaper cellphone calls.

However, De Vries says the interconnect income is like any other revenue stream. He admits it's a fairly stable and predictable income, and some of the finances have been committed to other long-term projects.

“If the rate is cut dramatically, we will have to source the funding from somewhere else,” he notes. He is quick to point out that interconnect cost-cutting may not, and generally doesn't, equate to consumer rate cuts.