Interconnection rates- Telkom to save a R1 bln

A new report by South Africa’s Department of Communications says the three mobile network providers in the country will lose significantly in revenue once the new peak interconnection rate are implemented next month.

The report states that Telkom, the sole landline services provider will benefit from the move.

“It is estimated that Vodacom, Cell C and MTN will together lose R1 billion a year in revenue once the new peak interconnection rate is implemented by March 2010, while Telkom will save R1 billion annually.

“The possible benefits from an increased subscriber base and increased usage due to lower tariffs is yet to be determined. The peak mobile interconnection rate will be reduced from R1.25 cents per minute to 89 cents per minute.

“The reduction is expected to stimulate competition. A lower interconnection rate will reduce the barrier to entry for smaller players in the sector”, the Department said in the statement.

It also said the move will enhance competition in the sector.

“It is also anticipated that operators will introduce innovative products at an affordable rate to keep and increase their subscribers. Besides the traffic differential, the main issue is the difference between mobile peak termination rate of R1.25 and the Telkom’s peak termination rate of around 25 cents”.

Telkom paid the three mobile operators R5.4 billion in interconnection fees during its last financial year. Of that, R3 billion was paid to Vodacom and the rest was split between MTN and Cell C.

MTN, Vodacom and Cell C recently agreed to lower the interconnection rates among them, a move that has been approved by the country’s regulator of the telecommunications industry.

by Goodman Majola