The Independent Communications Authority of SA's (ICASA's) new draft regulations on telecommunications licence fees have seen the cost drop significantly.
The second draft of the cost framework, published in the Government Gazette this week, appears to have the authority once again bowing to operator pressure. However, ICASA says the lower licence fee proposal will boost competition in the market and will pass savings onto telecoms customers.
The authority initially proposed that telecoms companies, including the recently converted value-added network service providers (VANS), would have to pay up to 3% of “adjusted revenue” to ICASA as an annual licence fee.
The framework was shelved after an outcry from industry. The proposed 3% of turnover would have had the then VANS paying over 30 times more for their licences. The new regulations cut this down dramatically.
Both class (local) and individual (national) licences have been given the same percentage to work from and, according to ICASA's commentary on the licence fee regulations, it will enable smaller companies with smaller profits to have access to the ECNS licence.
The new regulations see that percentage halved (1.5%) and the financial focus shifted from gross revenue to gross profit. The telcos, specifically the VANS, are happier, because profit is a far smaller figure than revenue on all balance sheets.
For example, in the initial regulations, MTN would have paid on its interim revenue (six months ended June 2008) figure of R46 billion, a whopping R1.38 billion for its licence annually. That is only a half-year figure, expected to be double that at today's results presentation.
Under the new legislation, the company would pay off the same period profit of R6 billion, closer to R90 million for its licence annually.
Further drop urged
MTN, Telkom and Vodacom will also pay more for their licences than a company like MWeb. However, some telcos would prefer the fee to be lower. Newcomer ECN says it would like to see the cost dropped lower, to 1% of profit.
“In principle, we support ICASA's new proposals. The new fee structure, which is based on 1.5% of gross profit instead of 3% of turnover, is vastly improved. It works out to circa 10 times less then the original proposal depending on GP margins,” says ECN CEO John Holdsworth.
He says while he would prefer to see a lower percentage, the reduction is an acceptable balance between the old fee model and what the operators were looking for. “The fee structure is licence-neutral and will be relatively more expensive for the incumbents with higher gross profit margins than the previous VANS operators. Ideally, we would like to see the 1.5% reduced to 1%.”
Competing operator MWeb has decided not to comment on the new fee structure, saying it is discussing the new costs internally. Altech's spokesman and CEO were not available for comment on the matter.
According to ICASA spokesman Sekgoela Sekgoela, the licence fee does not cover the “tax” or required contribution to the under-serviced access fund, to which VANS currently pay in a total of 0.2% of their annual turnover. However, he says the compromise struck between the telcos and the authority should have an effect on consumer prices, because the old licence fee structures were rigid, whereas the new structure is manageable.
The authority recently tabled a set of regulations, which would have had a direct impact on consumer costs, after Vodacom brought legal action against it. The handset subsidy regulations would have seen consumers able to choose the period of their contracts (from six months to 12 months). These regulations seem to have once again been swept under the rug.
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