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March 31st, 2014 by

Cell C explosive - We May Have To Increase Prices: Cell C Cell C says that it may have to increase prices in the event that there is no certainty around the effective date of the 2014 call termination rate regulations.

Cellphone network operators MTN and Vodacom are challenging the introduction of new asymmetrical call termination rates.

These are the rates operators have to pay one another for calls to other networks. Icasa wants to implement a set of regulations that will see these rates drop to 10 cents a minute in 2016. But, for 2014, MTN and Vodacom will have to pay 44 cents a minute to smaller operators, while the smaller companies will have to pay only 20 cents, in an asymmetrical structure.

MTN and Vodacom want the 2014 regulations scrapped. Alternatively, they want interim relief to prevent the introduction of the new rates until they have been reviewed. A court ruling is expected on Monday (31 March) while Icasa’s implementation date is on Tuesday, 1 April.

In court documents, Cell C said: “The only realistic alternative available to Cell C in the event that there is no certainty around the effective date of the 2014 Regulations, would be for Cell C to increase retail tariffs more in line (although still below) those of the dominant operators.” “This would remove downward pressure on MTN’s and Vodacom’s retail tariffs, but also remove Cell C’s ability to grow market share.” South Africa’s third operator said that tariff increase would be a true structural change that would operate to the detriment of the consumer and the South African economy as a whole, “but it would be necessary in order for Cell C to remain in the market, albeit in a less sustainably competitive position”.

“The consequences of Cell C’s potential relegation to being an uncompetitive operator is uncertain (although of course it is clear that there will continue to be a MTN/Vodacom duopoly). However, this could still result in market failure,” it said. The group added that it is unlikely that such a structural change could be reversed even if Icasa should once again apply pro-competitive remedies.

The group said that a delay “impacts significantly on Cell C’s ability to finance further network investment and to offer further competitive services. I cannot emphasize too many times the significance of this as a concern of Cell C’s auditors and its financiers”.

“Any material delay in the implementation of the 2014 Regulations will, as a result, have additional devastating effects on Cell C’s business. These effects can be grouped into four main categories: creditors, customer care, network and technical matters, and negotiating power,” it said.

This article was originally published on Business Tech: