Cell C's ultimatum to Icasa

Mobile termination rates - the fees mobile operators pay to carry each other's calls on their networks - were cut to 40c last month from 56c.

They were as high as R1.25 three years ago.

Cell C is under pressure to grow its business and become profitable. Although it is attracting customers‚ the numbers are still low compared with its competitors. It argues that the slow pace of regulatory intervention is contributing to its problems.

High termination rates are seen as a barrier to small and new entrants from being able to compete effectively on prices because they have fewer customers and most of their calls are made to other networks‚ which results in them paying more in termination fees to the bigger operators.

Knott-Craig wants the rate to decrease to 10c and is calling for a 40c "asymmetric" mobile termination rate‚ which requires major operators to pay above the normal rate to their smaller counterparts.

In return‚ small operators will pay their competitors the normal rate. "Asymmetry is critical for the sustainability of competition. If you don't understand that‚ then you can't regulate‚" he said.

Cell C believes lower call termination rates will benefit the country‚ but only if there is greater asymmetry for smaller networks and new entrants.

Temination rates worth millions

The big mobile companies‚ Vodacom and MTN‚ earn millions from the termination rates.

Knott-Craig‚ Vodacom's former chief executive who joined Cell C in April last year‚ said the group would "use the law" to exert pressure on the Independent Communications Authority of South Africa (Icasa) to change the rates.

Pressed for more details and asked if Cell C may report its competitors to the Competition Commission regarding their same-network voice call rates‚ he said: "I will use everything in my power to get Icasa to do its job. We have to protect our company and the industry. It is also in the interests of all consumers."

Other countries have passed tough pricing regulations and imposed, among other things‚ flat rates across all networks

In December‚ France's two biggest mobile phone groups were fined a total of €183m for distorting competition and harming smaller rival Bouygues by offering free unlimited calls between subscribers on the same network.

Icasa said in February it would conduct a study to determine the effect of the reduction in mobile termination rates in the market.

Icasa spokesman Paseka Maleka said the review of the call termination market "has already started" and that the authority aims to finalise it during the current financial year.

The regulator said it was concerned that the pricing of calls made on the same network may be below the termination rate‚ "an indication that operators are pricing on-network calls at below the true cost of a call‚ or that the current termination rates are still too high".

Vodacom and MTN say while there is still room for reductions in mobile termination rates‚ proper procedures should be followed.

Cell C has grown its customer base from 9m to almost 11m mainly through price cuts on calls and data.