MTC gets a whipping

MTC has been branded as ‘self-serving’ by an independent research tank, who accused the operator of using its market dominance and high retail prices to prevent Cell One and Switch from gaining market share.

It was also accused of ‘starving’ Telecom Namibia’s fixed-line network.Anti-competitive practices and the abuse of market domination are not allowed in terms of MTC’s license, Research ICT Africa points out in their study on interconnection charges that was conducted on behalf of the Namibia Communications Commission (NCC).The report resulted in the introduction of a single interconnection charge of 60 cents, down from the highest fee of N$1,06 previously, at the beginning of July. The charge will gradually be reduced to 30 cents by 2011.In their study, Research ICT Africa takes a dim view of MTC’s business conduct, especially its use of mobile termination rates (MTRs), or the fees it charges Cell One and Telecom Namibia to terminate calls on their networks. MTRs are a significant input cost and play a big role in what phone companies charge consumers.Unlike Cell One and Telecom Namibia, MTC refused to supply Research ICT Africa with cost and other data, other than what appears in their annual report, to help the team come up with the business model with uniform interconnection charges, designed to save the consumer a considerable amount in phone costs.’Rather it proposes its own glide path model with termination rates that are not cost-based, transparent, sufficiently unbundled, or subject to independent corroboration,’ Research ICT Africa says in their report.This, according to them, is ‘unco-operative and self-serving’.Furthermore, Research ICT Africa adds, MTC’s license requires their MTRs to be cost-based, transparent and sufficiently unbundled.The study says that MTC’s fixed retail rates are up to 530 per cent and 570 per cent of the fixed termination rate for its most popular products, Tango and Tango per second. ‘This indicates a strategy to starve the fixed-line network (Telecom Namibia) by providing a strong disincentive for its customers to call fixed numbers.’ Further in the report it adds: ‘By keeping its retail prices very high, MTC causes traffic imbalances and net interconnection inflows.’Subsequently, both Cell One and Telecom Namibia currently have to make huge interconnection payments to MTC, ‘crippling’ the companies, the report states.The report refers to a recent statement by the European Union (EU) to explain the need to regulate price termination rates to boost competition. ‘Higher mobile termination rates make it harder for fixed and small mobile operators to compete with large mobile operators,’ the EU said.Research ICT Africa also frowns upon MTC’s financial performance.The operator had an Ebitda (earnings before interest, taxes, depreciation and amortisation) margin of 49 per cent last year. In comparison, Vodacom SA had an Ebitda of 35 per cent and Orange UK had 20 per cent.This figure, a reliable indicator of operating cash flow, is ‘very high internationally, and high even for Africa’, Research ICT Africa says.A high Ebitda margin for a company operating in a competitive market is an admirable achievement, it adds. ‘For an incumbent operator with 87 per cent market share however, it generally reflects the exercise of market power,’ the report states.MTC also enjoyed a ‘very high’ return on equity (ROE) of about 50 per cent until 2005, when Cell One entered the market. Since then its ROE, generally seen as a company’s ability to generate profit, has dropped to a ‘still-high’ 37 per cent in 2006, 34 per cent in 2007 and 32 per cent last year.Research ICT Africa says the NCC needs to ‘move swiftly to avoid market exit and ensure that operators compete fairly for market share’.They also suggest more ‘pro-competitive’ interventions like number portability and retail price regulation to further level the playing field.jo-mare@namibian.com.na