Vodacom warns on cellphone rates cuts

Pieter Uys, Vodacom CEO. Pic:Trevor Samson. Circa 2009. © Financial Mail
Pieter Uys, Vodacom CEO. Pic:Trevor Samson. Circa 2009. © Financial Mail

VODACOM has warned MPs that the government's plan to force a cut in mobile phone rates could see nearly a third of the company's "marginal" customers cut off.

"An arbitrary and ill-considered intervention could have unintended consequences which could result in the disconnection of marginal customers who make up at least 30percent of our customer base," chief executive Pieter Uys said in a written submission, which he defended in a robust question and answer session with MPs yesterday.

Uys defended Vodacom's cost structure on the first day of hearings on the government's plan to force a reduction in the rate that cell phone companies charge each other to connect calls from R1,25 a minute during peak times to a maximum of 60 cents. The so-called interconnect rate underpins call charges widely assessed to be the highest in the world after Mexico and Turkey.

Uys said the interconnection fee had allowed mobile phone companies to extend services to people who made very few calls. Without the levy, it might not be economically viable to keep them connected, he said. The government wants the cut implemented before the Christmas holiday season, when mobile traffic traditionally peaks.

Telkom told the committee it had paid mobile phone companies nearly R5,5billion in each of the past two years for calls from its fixed lines to their wireless networks.

Uys refused repeatedly to give the actual cost of connecting a call from a rival service, but said it was higher than the figures ranging from 20 cents to 60 cents a minute given to the committee.

Icasa, the telecommunications regulator, said on Monday it would make a determination on a new price structure next week. It said the rate would include a profit of not more than 50percent.

In a directive issued yesterday, Minister of Communications Siphiwe Nyanda gave Icasa until November 30 to "lower the interconnection rates, specifically the mobile termination rates, to a cost-based rate."

The hearing continues today.