Expenditure cuts required will affect economic growth
MTN: Tariff cuts require rebalancing business model
Securing lowest interconnect fee feasible
October 14, 2009
MTN Group said the country's economic growth and broadband penetration would be affected by cuts in mobile charges if the company is not allowed to rebalance its business in a phased manner.
The South African government is holding public hearings, as part of plans to push mobile and telecom operators to reduce interconnection fees, in an attempt to lower telecoms costs that have impacted the country's growth.
"A rigorous and balanced approach is required to ensure the success story of South Africa mobile penetration to all sections of society... Securing the lowest possible economically feasible interconnection rate is easy. Doing it in a way that delivers on growth and government objectives is the real challenge," MTN said in its submission on Wednesday. Mobile phone and telecoms operators charge R1.25 per minute in peak times for their interconnection fee, a charge to enable calls to be transmitted from each other's networks. The ministry said on Tuesday South African communications costs were higher than those charged by peers like South Korea, Malaysia and India.
"If MTN is not allowed to rebalance its business in a phased manner, expenditure cuts will be required. This will affect economic growth and other government objectives such as development of broadband," MTN said.
The company added its margins in South Africa compared poorly within Africa, and any reduction in interconnection prices would need to be recovered in other parts of its business. South Africa's competition commission said on Wednesday it supported a process of arriving at an interim interconnect figure quickly, but warned of challenges if this figure was arbitrary.
"We support an expedient process to arrive at an interim figure. However, we note that any figure which is arrived at arbitrarily may be subject to challenge," the competition commission said in a written submission. - Reuters
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