Competition watchdog throws out complaint against Vodacom, MTN

21 April 2017

Mergers, Acquisitions and Financial Results

Cape Town - The Competition Commission will not prosecute a complaint lodged by Cell C against Vodacom and MTN, it announced on Tuesday.

The complaint relates to anti-competitive conduct and was lodged in 2013, however there was insufficient evidence required to successfully prosecute, the Commission said in a statement on Tuesday.

"This decision follows a lengthy investigation which revealed that there were several features in the mobile telephony market which affect the ability of smaller mobile operators to compete in the market."

Cell C alleged Vodacom and MTN of engaging in pricing strategies that made it cheaper to make on-net calls compared to off-net calls. On-net calls are between users of the same network, while off-net calls are between people on different networks.

Then Cell C CEO Alan Knott-Craig said in a statement at the time that MTN and Vodacom offer discounts when customers call subscribers on the same network, but charge a premium for calls to other networks.

"This amounts to discriminatory pricing and is without a doubt anti-competitive when adopted by dominant operators," he said.

In particular, Cell C complained that the price differentials applied by Vodacom and MTN prevented competition and further accused the two companies of excessive pricing, inducement and margin squeeze.

The Commission found that it would be unlikley to succeed in a prosecution of the specific conduct subject to Cell C’s complaint.

However, it added that there is evidence to suggest that this conduct and other features of the market, in particular the price differentials applied for on-net and off-net calls as well as long-term subscribers’ contracts have made it difficult for late entrants such as Cell C to compete effectively.

"There is therefore a need to look broadly into the state of competition in the mobile telephony market in South Africa, specifically at the retail level, as the market is still dominated by two mobile market players, years after the licensing of Cell C and Telkom Mobile," the Commission said.

In this regard, the Commission will engage the Independent Communications Authority of South Africa (ICASA) to explore regulatory interventions that may be necessary to make the market competitive.

The shares of Vodacom and MTN were down on Tuesday at 17:24. Vodacom was trading 0.57% lower at R147.64, while MTN was 1.25% lower at R122.83.

Source: fin24