MTN told the court on Tuesday that it stands to lose about 450 million rand in revenue, should the Independent Communications Authority of South Africa (ICASA) implement its 2014 Mobile Termination Rates (MTRs).
(READ MORE: ICASA's move could cost MTN millions)
However, Icasa’s Senior Counsel David Unterhalter highlighted that for about a decade, MTN and Vodacom determined MTRs on their own, with no regulation. In this period both networks charged extremely high rates and pocketed huge sums of money.
He went on to highlight that as soon as Cell C entered the market, both networks colluded and increased their prices in an attempt to squash the competition, Cell C.
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Last year the World Economic Forum issued its Global IT report which ranked SA 117 out of 140 countries regarding mobile communications costs, the number one nation being the cheapest.
The South African regulator said these were the reasons it decided to step in and regulate the market.
Both MTN and Vodacom had presented arguments in a joint case against ICASA however, according to the regulator, both networks had agreed that MTRs needed to be brought down to cost price, which is 10 cent.
“It was agreed that the reduction of costs to get to 10 cent would not be done all at once but will be phased out over three years,” said Unterhalter.
The regulator said it would review the rate cuts of 2015 and 2016, not the proposed 2014 cuts.
It argues that it’s necessary to treat smaller players differently using asymmetry in the wholesale market because the networks are not similarly positioned.
ICASA said the reduction of MTR costs does not have to happen at the same time for everyone, though ultimately all operators will have to change their rates at the 10 cent cost price.
This would allow the smaller players to charge bigger players higher MTRs for now, which is in the interest of giving these networks an opportunity to be competitive in the pricing, which will lead them to gaining market share.
The regulator argued that if the court granted MTN and Vodacom interim relief, that will leave the market unregulated, which meant that the big networks would once again decide on the price.
“If the market is left unregulated, we will see the big networks setting rates that don't allow the competition to be price competitive,” said Unterhalter.