'SA mobile industry is competitive'

By Candice Jones, ITWeb online telecoms editor

Johannesburg, 19 Feb 2009

The Independent Communications Authority of SA's (ICASA's) hearings on proposed carrier pre-select (CPS) regulations kicked off yesterday, with mobile and fixed-line operators vying for the upper hand.

ICASA's proposed regulations have been praised by several industry analysts as a cornerstone of telecommunication competition in SA. CPS has been widely used globally to combat dominant market power by a few telecoms players.

Yesterday's hearings had MTN face off against Telkom, ECN and the Internet Service Providers Association of SA on whether mobile operators should be included in the regulatory framework for CPS.

CPS essentially means consumers or companies, while subscribed to one provider, such as Telkom, can make a call taking advantage of special or cheaper rates by another company, like Neotel. Customers will have to dial a predefined code to access the right service provider.

Take mobile out

MTN's participatory panel at the hearings called on ICASA to leave the mobile operators out of the CPS regulations, claiming the solution as a competition booster is not required in the South African mobile market.

The company explained to ICASA councillor Nomvuyiso Batyi, chairman at the hearings, that the mobile market is already open and competitive. “CPS is a remedy to anti-competitive markets, and there is open competition in the mobile industry here.”

We need this regulation. It is one of the building blocks of competition internationally.
Irnest Kaplan, MD, Kaplan Equity Analysts

The company has called on the authority to conduct a proper market analysis to investigate whether the mobile operators have significant market power or not. However, MTN is considered by many industry watchers to be one of two dominant players in the market.

At MTN's last annual report presentation, for the year ended 31 December 2007, the company noted it had roughly 36% of the mobile market share. Vodacom, which is expected to present to ICASA today, has around 52% of the local market share; leaving 12% for Cell C and Virgin Mobile, with the majority in Cell C's pocket.

Another argument put forward by MTN is that certain customers are using more than one SIM card from more than one operator, which allows them to make use of specials on other networks. The panel went on to say there are other remedies already in place, such as mobile number portability and prepaid, both of which allow consumer choice.

Put mobile in

Fixed-line providers like Telkom and market newcomer ECN are concerned the mobile operators will not be included. Both agree that taking out the mobile players cuts out the vast majority of South African telecoms users.

ECN CEO John Holdsworth says if the mobile operators are not included in the regulations, the benefits of CPS will only reach roughly 9.5% of the telecoms market, with the mobile penetration over 80% locally.

He says MTN's argument around the multiple SIM card use is evidence in itself that mobile players are looking for a solution like CPS. “By their own argument, there is a need for CPS."

Holdsworth explains that, in a few years' time, there will be no way to distinguish between fixed-line operators and mobile operators, because all networks are becoming converged.

ECN and other smaller market players stand to gain a presence around telephone switching through CPS. Holdsworth says this would give the company the reach it needs to grow its customer base.

Telkom's panel agreed that mobile operators should be included under the new set of regulations. However, it says the provision of CPS should only apply to electronic communication services licensees and not electronic communications network service licence-holders.

Good, bad and competition

In emerging markets, like Malta, the solution has been effectively used to bring smaller telecoms companies into a profitable situation next to incumbent monopolies. However, the same solution in the UK proved detrimental to some.

Richard Hurst, programme manager of communications at IDC Africa, points out that a similar situation could occur in SA. “Some of the smaller players, with limited infrastructure and user traffic, will not survive. The larger players can lower the prices beyond what the smaller telecoms businesses can generally afford.”

However, Irnest Kaplan, MD of Kaplan Equity Analysts, says the solution could be a boon for competitive telecoms rates in the country. “We need this regulation. It is one of the building blocks of competition internationally.”

He says that, while there are currently only two fixed-line players in the market, in a year or two there will be more. The carrier pre-select regulations will give those players an opportunity to market cheaper call rates and gain users.

“It will allow players to market specific routes at cheaper rates and it allows consumers to choose which provider will carry calls over the routes they want,” he adds.

ICASA has scheduled a workshop on CPS next week, for the operators to bash out the details of the regulations.