Consumers benefit from a drop in the actual cost of prepaid mobile voice call

The introduction of Call Termination Rate Regulations in March 2010, has resulted in the cost of prepaid mobile voice calls dropping by 24% from June 2010 to June 2012, from R1.37 to R1.04. The 24% drop in the costs for prepaid mobile voice calls clearly demonstrates that the benefits of the reduction in termination rates has led to a direct benefit to end-users and particularly the prepaid market, the majority of mobile phone users.

Termination rates represent the fee that one operator must pay another in order for consumers to contact each other, where a high termination rate keeps off-net retail prices high.

The actual cost of a call faced by an end-user is not the advertised, or headline tariff, but the combination of free minutes for recharging and other promotions as well as those calls for which the end-user actually pays. The introduction of one-rate packages across networks in 2010, new tariff plans launched in early 2012 as well as the increased number and benefits available to end-users through promotional packages subsequent to the regulation of termination rates indicate an increasingly competitive retail market and lower retail prices.

The termination rate is set to fall further from the current R0.56 at peak time to R0.40 in March 2013.

The effective tariff is calculated by comparing total revenue to total traffic volumes for a given period of time. The figures below indicate the industry trend in the effective tariff for a mobile prepaid voice call on a six-monthly basis from January 2010 to June 2012.

Table 1: The trends in the effective tariff for a prepaid mobile voice call

Source: MTN, Cell C & Vodacom data

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