SA's telecommunications and broadcast regulator had offered to implement mobile termination rate cuts on a limited basis, in a move made just before the widely-publicised court decision that had the same effect.
On 6 March - 20 days before several lawyers and senior counsel met to argue over the validity of termination rate cuts - lawyers acting on behalf of the Independent Communications Authority of SA (ICASA) offered a settlement to SA's mobile duopoly.
The offer was to implement the first year of the glide path for six months, and ICASA would "immediately" start with a new regulatory process to cover the remaining period, which would come into effect in October.
ICASA's offer, a copy of which is annexed to its responding affidavit for the court case, was open until 10 March, and lapsed at 9am. It was extended to the duopoly, Cell C and Telkom. However, lawyers for both MTN and Vodacom responded that it was "not acceptable", while Cell C and Telkom were both happy to accept the deal.
Insufficient
Vodacom spokesman Richard Boorman explains the offer was rejected, because it did not address its concerns around ICASA's process.
"The case could have been avoided if our process concerns, which were raised with the regulator last year, had been addressed at that point. The end result is that that those concerns will now be addressed."
MTN's general manager for regulatory, Graham de Vries, says ICASA's settlement offer "sought to give effect to the very substance of the regulation that MTN was asking the court to grant relief against. The eventual judgement confirmed MTN's views and declared the regulation to be invalid and unlawful."
MTN and Vodacom took legal action against the regulator over its new mobile termination rates - the fees operators pay to carry calls on one another's network - introduced in January. Both had said they were in favour of lower rates, but not the way in which ICASA arrived at its determination.
They argued ICASA had not carried out the necessary processes prior to publishing regulations, which work in favour of smaller players Cell C and Telkom Mobile, and launched the urgent application to have the court set aside the regulations and review the process.
On 31 March, the South Gauteng High Court ruled the new mobile termination rate structure was "unlawful and invalid", but has suspended the order of invalidity for a period of six months. As a result, ICASA will have to go back to the drawing board to determine new rates.
However, based on ICASA's papers, it seems the regulator is still awaiting key information in order to review the regulatory process. In the letter sent to MTN and Vodacom's lawyers, it asks for "necessary cost information".
Boorman doubts this has been done, as this process can take as long as six months.
Pointless
Dominic Cull, owner of Ellipsis Regulatory Solutions, says the final judgement approximates the settlement offer made by ICASA and the judge was guided by what the regulator proposed.
Ovum analyst Richard Hurst says MTN and Vodacom, which have access to "vast" legal resources, may have hoped to achieve a better outcome by going through with the court proceedings.
However, notes Hurst, this was a gamble as the court could have ruled against the cellular giants. He says the case amounted to "much ado about nothing" and questions whether another similar battle will be fought when new regulations are issued.
Communications minister Yunus Carrim previously came down on the leading mobile operators for choosing to go the legal route in their tussle with ICASA over the termination rates. He said South African companies were too quick to jump into courts, when negotiation could be used to resolve issues.
Carrim called it "best South African tradition" to drag litigation into issues that would be solved more expediently in terms of cost and time. "Somalia is moving on. Iraq is moving on. We will be stuck in the dark ages if we don't move on as well. Please, let us act in the interests of the country," he pleaded.
The minister added legal action by big companies is often a product of drive for profits, rather than of a desire to serve the country's interest. "Court action should be a last resort," said Carrim.
Minimal impact
As of 1 April, mobile termination rates for Vodacom and MTN will drop to 20c - half the current cost - while Cell C and Telkom Mobile will be able to charge the two larger players more than double that (44c) to terminate calls on their network.
However, the asymmetry for next year and 2016 will remain under review, with a fresh set of regulations due to be announced in October, as per the court's six-month suspension of invalidity order.
The glide path would have seen Vodacom and MTN pay their smaller rivals four times the amount they would receive in return (10c) from March 2016.
In an open letter published yesterday in the Sunday Times, the regulator explains the judgement means call charges for consumers will not necessarily come down. "ICASA hopes that the operators will set lower call charges because the interconnection rates that they pay each other have in some cases been reduced."
ICASA adds operators are not required to reduce call rates by the full amount of the reduced interconnection rate. "ICASA hopes, however, that the operators pass on the benefit of the new call termination rates to consumers to the greatest extent possible."
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