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Other sectors to follow cellphone industry The South African government and regulatory authorities are set to continue their assault on high costs in the South African cellphone industry in the immediate future. South Africa is believed to have among the highest telecommunications costs in the world, inhibiting business. In the latest move, the Competition Commission has subpoenaed key people at South Africa’s two largest cellphone operators, MTN and Vodacom, for suspected price-fixing.
This follows an earlier move by Cabinet, forcing the Independent Communications Authority of South Africa (Icasa) to engage with the industry with a view to lowering certain costs being charged to consumers.
The high cost of telecommunications in South Africa has long been held up as one of the factors increasing the cost of doing business here, inhibiting investment and the development of the small business sector.
Now, finally, the government has decided to act, making it known that it wanted to force cellphone operators to drop their interconnection (between networks) rates by 30c from R1.25 to R0.95 by the end of November, with a further decrease to R0.60 over the next year.
Cellphone operators such as Vodacom are believed to be digging in their heels, insisting it is not the government’s business to intervene in the industry in ways that have financial implications. The government, the Department of Communications and Parliament’s Portfolio Committee on Communications have all tried to persuade the cellphone industry – which makes exorbitant profits – to find ways to cut costs. The portfolio committee also criticised Icasa for being too accommodating of the industry.
Failure by the industry to come up with its own cost-cutting proposals last week prompted the Cabinet to approve the moves by the Department of Communications to force costs down. Icasa will this week again meet with industry players in a further attempt to get them to lower their costs.
Meanwhile, the industry now also has to face assault from another direction –this time from the Competition Commission. An undisclosed number of employees from MTN and Vodacom have been subpoenaed to appear before the Commission on allegations of price collusion relating directly to the interconnection fees that were targeted by the government and Icasa. These fees were raised by 500% in 2001 by the two operators, the same year in which a third and much smaller operator, Cell C, entered the market.
But officials at the Competition Commission are believed to have found it difficult so far to find evidence of explicit collusion and are hoping that by subpoenaing the employees of the two companies for interviews, it may learn more about the background to the interconnection fees currently being charged.
MTN and Vodacom have now joined other major South African companies and sectors on the government’s A-list of alleged price fixers.
The government and the regulatory authorities are still taking aim at major food producers and supermarket retailers after several producers paid hefty fines in the recent past. Pharmaceutical companies are also on the list, while steel producers and construction companies have recently been targeted, too.
The banking sector, whose fees were also under scrutiny, appears to have received some reprieve by default due to the perceived role the banking system played in cushioning South Africa against the worst of the global financial crisis. However, there is still considerable pressure being exerted within the ANC, particularly from the ANC Alliance’s leftwing, that high banking costs be addressed.
This could go either way, as right now the ANC is embroiled in an internal political struggle with its left-wing allies over control of economic policy with direct implications for the financial sector. The ANC may therefore at present prefer to resist calls from the Left for anything that may look like interference in business. However, that is not guaranteed.
Meanwhile, with the exclusion of Sasol, the petroleum and chemicals sector also still seems to be exempted from the current drive by the government and regulatory authorities.
The Competition Commission is also starting to take a keener interest in the activities of trade and industry associations in South Africa.
