While it is now well known that the Independent Communications Authority of SA's (ICASA's) new termination rate regime is a significant windfall for SA's smaller mobile operators - and the opposite for their two leading counterparts - not much has been said about the fixed-line market.
Analysts say while the new termination rates will have a far lesser effect on the fixed-line market, they will, to a degree, support the move towards fixed-mobile convergence (FMC) - a market SA's fixed-line incumbent Telkom has long been gunning for.
ICASA's 2014 call termination regulations, released last month, will see termination rates for both mobile and fixed-line operators whittled down to an all-time low of 10c over the next three years.
According to the regulator's plan, Vodacom and MTN will this year drop their mobile termination rates (MTRs) from the current 40c to 20c, followed by a drop to 15c next year and a further 5c reduction in 2016. Cell C and Telkom Mobile, which have the advantage of asymmetry, will be able to charge the incumbents 44c this year, 42c next and 40c in 2016.
As for fixed termination rates (FTRs), the rate remains at 12c in respect of local interconnection for the coming year, while the rate for the national interconnections will fall from 19c to 16c. In 2016, MTRs and FTRs will be unified at 10c.
Termination rates are the fees operators pay each other to carry calls on their networks.
Convergence crutch
World Wide Worx MD Arthur Goldstuck says with just 3.7 million fixed lines - compared to the 41 million individual mobile connections and 68 million active SIMs in SA - the topic of FTRs is a bit of a non-issue.
That said, he says ICASA is levelling the playing field between fixed and mobile telephony. "There is no reason for the rates to be different."
Telkom last month welcomed ICASA's move, saying it supports the move to convergence between fixed and mobile services.
Ovum analyst Richard Hurst says the new MTRs - and a parallel rate for mobile and fixed - will certainly support the move towards FMC, but this is only one of the factors behind the FMC strategy. "Other issues such as technology, platforms, coverage and availability will also play in the market uptake of FMC services."
IDC analyst Spiwe Chireka says ICASA's new termination rates make sense for FMC. "We are seeing the bundling of mobile and fixed products selling as FMC, but the reality is most people use mobile, so it is great to get a thousand minutes for fixed-line calls, but the consumer cannot fully reap the benefits."
With a level playing field in terms of costs, she says, Telkom will be able to fulfil its aim to ultimately drive fixed traffic - but also offer the option of mobile. "This also makes it easier for the consumer."
Marginal revenue
Goldstuck says the fixed termination rate has never been a major revenue stream for Telkom.
Ironically, he says, the fixed-line market was in the past always given a lower termination rate as it was considered the mass market utility. "Fixed-line has now become the elite communication utility."
The incumbent continues to see a year-on-year decline in the number of fixed lines in use, with the majority being deployed by the enterprise sector. The company has been mulling its mobile options in light of this.
In November, Telkom reported a 4.7% drop in fixed-line voice and interconnection revenue.
* ICASA last week postponed the application of the new termination rates - set to take effect next month - to May, after MTN launched a High Court application asking the court to review the regulator's MTR process, and to set aside those parts of the regulations it finds are irregular.
The case was scheduled to be heard on 25 February, but ICASA says it will request a later date.
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