Telkom angry about new fixed termination rate

Telkom has attacked new call termination regulations that aim to cut voice communication costs and give smaller players a leg up, saying these unfairly prejudice its fixed-line business.

Operators have previously made a lot of money charging for calls between networks. But new rules from the Independent Communications Authority of SA (Icasa) could see call termination rates halved over the next year.

Icasa, which intends to enforce the new rules from July, says this is one of a set of measures to reduce the cost to communicate. In essence, the rules reduce the costs of making calls to subscribers on other operators’ networks. From a competition perspective, the lower the termination rates, the better for smaller operators.

The large mobile operators now charge 9c per minute to terminate a call on another operator’s network. Icasa, says this will be reduced to 7c in July and to 4c per minute in July 2025. Small players now charge 13c per minute, which is set to go down to 9c, then 4c by July 2025.

“The authority believes that the wholesale voice call termination rates set out in the draft regulations will aid in transitioning the market towards a more competitive landscape as contemplated in the objects of the 2005 Electronic Communications Act [ECA],” said the regulator.

Fixed-line operator Telkom said it welcomed the authority’s reduction in mobile termination rates to the extent that they were more aligned with costs because “lower call termination rates enable smaller mobile operators like Telkom to compete more effectively in the provision of voice services”.

Distinction blurring

However, it said that it was concerned with Icasa’s decision to not align the fixed termination rate with the mobile termination rate, “but rather to drastically reduce the fixed termination rate to a rate which is significantly lower than the mobile termination rate”. All operators pay 6c per minute for calls to a fixed device. This is set to decrease to 4c in July, then to 1c in July 2025.

The state-affiliated operator said this was especially concerning “at a time when the distinction between fixed and mobile calls, from both operator and consumer perspectives, is blurring and fixed-mobile substitution in the voice market is increasing.

“These trends make the average cost of terminating a fixed call the same, if not more expensive, than terminating a mobile call.”

While Telkom has made its grievances with the new rules known, MTN said it was studying the draft regulation “to determine the impact this will have on our business”, while Vodacom is of the view that “critically, and given that the cost models must still be finalised, it is premature to comment on Icasa’s proposed glide paths”.

SA’s largest mobile operator did, however, confirm that it would be making a submission on May 10 as feedback. MTN has seen a similar situation in Rwanda, where the regulator in that country moved to cut mobile termination rates to zero in August 2023.

MTN Rwanda reported that its earnings were negatively affected by the directive in the fourth quarter, which affected its interconnect revenue. While the new rules seek to align the amounts paid by large and small operators, new entrants to the market will pay higher amounts for calls to both mobile and fixed devices at 7c and 4c per minute, respectively, for a period of three years after entering the market.

The regulator has added a clause that international termination rates charged by an operator must not be less than the SA termination rates as set out in its new guidelines or higher than the rate charged by the international operator.

gavazam@businesslive.co.za