Lower call charges on horizon in South Africa

Government to consult on “very high” interconnection fees after general election

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By  Vineetha Menon Published  April 22, 2009

Consumers in South Africa could be in line for cheaper calls following a government decision to review the structure of fees that operators charge each other.

Operators charge each other for calls made to their network on a ‘calling party pays’ basis, and the fees charged by operators in South Africa are among the highest in Africa.

The current rate for peak rate mobile-to-mobile calls is R1.25. The initial interconnection agreement between South Africa’s Vodacom and MTN in 1994 set the rate at 20c per minute, but over the course of seven years, the rate rose by over 500% to R1.23.

South Africa’s Ministry of Communications has announced that a programme is being developed that it hopes will “reduce the cost to communicate”.

Spokesperson Joe Makhafola, told CommsMEA that as part of the programme a review of the structure of interconnectivity rates is due to take place.

“A series of public consultations will commence in respect of key elements in the programme once it’s been approved by Cabinet, after the elections,” he said, which are taking place this week.

Because the operator making the call pays the charge, the system tends to favour incumbent networks with a larger subscriber base.

The CEO of South Africa’s only mobile virtual network, Virgin Mobile, described the interconnection fees in South Africa as “very high”.

Steve Bailey told CommsMEA that interconnection charges were one of the reasons that the MVNO recently reduced the size of the market that it focuses on.

Bailey called for interconnection fees that would acknowledge the smaller customer base of new entrants such as Virgin Mobile.

“Asymmetric interconnects would stimulate the market and allow new entrants to compete. One of the key reasons that we had to pull out of prepaid is that we can’t compete with the current interconnect rates,” he said.

Africa Analysis partner Dobek Pater, who described the interconnection charges in South Africa as “still very unbalanced, and still relatively high”, said he was hopeful that any reduction in the fees would be passed on to consumers.

“It doesn’t always happen, but that’s usually the intent behind it. It’s just a question of when the regulator addresses the topic. It has been talked about for the last two years but it is now getting closer to the implementation stage.”

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