Rate cut costs Vodacom R600m

VODACOM said it has lost about R600million due to a rate cut imposed by the regulator and has warned proposed further cuts would be "devastating".

VODACOM said it has lost about R600million due to a rate cut imposed by the regulator and has warned proposed further cuts would be "devastating".

Vodacom, which is majority owned by Britain's Vodafone, said yesterday it has lost about R600million in the last three months since the rate cut.

SA's communications regulator in March forced wireless operators to reduce their interconnection fees, the rate they charge to use each other's networks.

Vodacom has cut its rate for peak calls by nearly 29percent to 89 cents a minute. That has cost it about R600million so far, Vodacom spokesperson Richard Bramson said.

The Independent Communications Authority of South Africa has proposed that companies further reduce the rate to 65 cents a minute by tomorrow and to 40 cents in 2012.

Vodacom has offered to cut rates during peak times to 50 cents by 2013.

The company said at a hearing with the regulator on Monday that the proposed cuts would have a "devastating" effect on its business.

Equities research specialist group Macquarie First South said Vodacom's submission to Independent Communications Authority of SA was "aggressive, but not unreasonable".

"Vodacom's position is likely to prove typical of the industry position, that the end point of the glide path (40c) is reasonable. However, a second proposed cut (to 89c from 65c, effective from tomorrow) so soon after the first (from 125c to 89c, effective from March 1) is likely to have unintended consequences," Macquarie First South said.

"Vodacom proposes that the second cut be deferred to March 1 2011, 12 months after the first. The councillors did not appear unsympathetic to this view," the group said. - Reuters and I-Net Bridge

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