Picture: THINKSTOCK
Picture: THINKSTOCK

COMPETITION had pushed down mobile pricing and South Africa now favourably compared with "peer" countries, MTN South Africa MD Karel Pienaar said on Friday.

He was speaking during public hearings on communication costs in South Africa, organised by Parliament.

Out of 46 African countries on the mobile prepaid pricing index compiled by Research ICT Africa, South Africa’s ranking — based on the cheapest product of the dominant operator — worsened between January and September, from 20th to 33rd.

South Africa is also reported to have the most expensive mobile broadband on the continent.

However, in his submission to members of Parliament’s communications portfolio committee, Mr Pienaar said the poor were getting a "good" deal with regard to cellphone costs and it was not accurate to suggest that consumers in South Africa pay more than their overseas counterparts.

Mr Pienaar also said that regulators in the sector had to let market forces continue to drive down prices. The mobile sector in South Africa is dominated by Vodacom and MTN, with Cell C a distant third.

The Department of Communications told MPs last week that the two largest mobile giants were the most resistant to passing on price reductions in mobile termination rates to consumers.

Termination rates are fees operators pay each other for customers to make calls across networks. The department said it was considering imposing a flat rate on mobile voice calls. Call termination regulations were introduced in 2010 amid the unveiling of a "glide path" that would see mobile termination rates slashed to 40c in March next year, from 56c.

Mr Pienaar said the cost conversion had to include the total investment and the effort operators make to put the infrastructure in place. "If you undermine it too much, then there will be a lack of investment … we have seen that in Uganda where we operate, the prices went back up because the prices just dropped too low and investment stopped dead in its tracks, and we do not want to see this in a country like ours … investment has to flow.

"MTN is saying: use the science, understand the cost structures, so that we end up with something which is calculated," he said.

However, Cell C CEO Alan Knott-Craig disagreed with Mr Pienaar’s views and told MPs last week that the key reason why the "true" cost to communicate in South Africa remained high, was the lack of competition.

"We are simply one of the most expensive countries to communicate … the promotions are excellent but we should not let that obscure that true cost of communication," Mr Knott-Craig said.

He said there needed to be active policy and regulatory interventions to boost competition in the sector.

Democratic Alliance MP Butch Steyn said the way to reduce high prices in the sector was through competition, "yet we have only got two dominant players in the market, and my view is that in the early years there is a possibility that there was more collusion and not competition between the two, and that is why we find ourselves in this situation".

"I tend to agree with Cell C that we need competition in a market, for it to become innovative and as cheap as possible, and we simply do not have that," Mr Steyn said.

The hearings will continue next year, with the general public and various other organisations, including nongovernmental organisations, all expected to make submissions.