mobile industry needs more service providers

ECONOMISTS yesterday suggested that the "problem" with the South African mobile telecommunications industry lies not with the high interconnection fees, but rather with the lack of sufficient competition in the sector.

This comes after weeks of robust political debate at parliamentary level on the current interconnection fee rates and the Competition Commission's vigour to conclude the investigations on possible anti-competitive practices by both MTN and Vodacom.

Investment Solutions economist Chris Hart, who acknowledged that mobile communications companies were facing a lot of pressure in the country, said there should not be a notion that the service providers were "enemies of the state".

He said: "Some of these issues are policy-driven. The structure of the industry is there because of policy and it is policy not to allow more players into the industry; and what we need is five or six service providers." He said Parliament should be careful not to "create multi-centres of regulation" or to "micro-manage" the economy.

Hart emphasised that some of the concerns should be taken up directly with the Independent Communications Authority of South Africa, the regulating body for the telecommunication sector responsible for policy.

Efficient Group economist Dawie Roodt said even though it was "bad news" for investors, the reality was that mobile telecommunication prices were high.

He said the problem was that the regulator itself does not know the "correct interconnection fee" that should be set.

Roodt also supported the view that the solution would be for government to allow more competition by weakening the barriers of entry. "Let the government make room for more competition in the sector and let the market decide what the correct price is, and this can be achieved by making it easier for other potential investors to participate," he said.

Competition Commission manager for enforcement and exemption Keith Weeks said "so far no evidence of collusion was found with regard to the setting of interconnection fees".

Cosatu spokesperson Patrick Craven said they believed the "prices are higher than they should be and hope that serious action will be taken against any companies with irregularities".