Cellphone Rates Cut in Doubt in South Africa After Icasa Steps in

Telecoms

A proposed cut in cellphone interconnection rates by next month looked in doubt last week after regulator the Independent Communications Authority of SA (Icasa) refused to endorse the operators' proposal for a 29% reduction.

Vodacom, MTN and Cell C submitted a draft agreement to Icasa on January 25, which would have seen the peak cost of connecting between networks fall from R1.25 to 89c a minute by March 1. High interconnection rates are widely considered a key factor behind South Africa's steep cellphone charges.

The delay is likely to embarrass Communications Minister Siphiwe Nyanda, who mediated the initial agreement in tense talks with the three cellphone companies in November. But Icasa said on Monday night that it would not support the agreement, complaining that doing so would have bound it "to an undertaking not to review mobile termination rates until March 1 2013".

The operators warned last week they could not go ahead with the planned cuts without the regulator's approval, but said they would address Icasa's concerns. Icasa's short statement gave little hope of this, however, saying it was "committed to releasing draft regulations on the effectiveness of competition in the wholesale call termination market in March".

Nyanda's agreement would have seen off-peak interconnection rates kept at 77c. Peak rates were to be cut to 89c from March, falling to 85c next year and 80c in 2011. Those reductions were evidently too little for Icasa, which has estimated the real cost of interconnection at 40c. An Icasa source told Business Day yesterday that regulators had felt the cellphone operators were "trying to tell us what to do".

Business Day