SA's top cellular operator Vodacom is preparing to write off between R150 million and R200 million in its earnings before interest, taxes, depreciation and amortisation, as the industry prepares for the introduction of asymmetric interconnect rates.
This is over and above the impact it expects mobile termination rate (MTR) cuts will have on future revenue.
Vodacom yesterday reported a R800 million loss in revenue due to voluntary rate cuts from R1.25 per minute to 89c in March this year.
The company forecasts further losses, following the publication of finalised interconnection regulations by the Independent Communications Authority of SA, which outlined more MTR cuts to an end goal of 40c, by 2013.
The regulations also makes provision for asymmetric rates for operators that have less than 25% of the market, and that face higher costs than the current dominant players.
This leaves the door open for both Cell C and Telkom's mobile arm, 8ta, to request rates that are 20% higher in the first year, 15% higher between 2012 and 2013, and 10% higher from March 2013, which is the end of the glide period.
Vodacom CEO Pieter Uys says it is unlikely Vodacom will challenge the authority's decision on asymmetry, but notes he was surprised that Cell C was considered a new player eligible to apply for asymmetric rates.
Uys notes that the impact of regulations will now have a bigger impact on revenue than the company first expected, but he says Vodacom is preparing for the challenges that lie ahead.
Gearing up
In anticipation of future losses in revenue, Vodacom will ramp up its focus on mobile broadband, notes Uys.
Vodacom also saw a surge in mobile Internet customers, adding 1.2 million new users, to reach 7.9 million, which Uys is confident it can maintain. The company has committed to increase investment in mobile broadband and fibre networks. Uys explains that Vodacom will expand its smartphone portfolio, while also boosting mobile Internet availability in the country.
This will be achieved through Vodacom's strategy to expand 3G coverage across the country, notes Uys. He says Vodacom had added 351 3G base stations and hopes to have between 600 and 650 more before the end of the year.
All 3G sites have a capacity of 14.4Mbps, and Vodacom has 1 800 HSPA+ sites in place, which Uys says will facilitate a smooth cross-over to an LTE-capable network when the time is right.
He states the operator will continue its cost programme initiative and will stimulate usage through continued promotional activity.
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