Vodacom Group Ltd. (VOD)’s Tanzanian unit said it’s concerned that a proposed reduction in interconnection fees may curb investment in telecommunications infrastructure in the East African nation.
The Tanzania Communications Regulatory Authority said on Jan. 18 it may lower the rate that mobile-phone companies charge each other for calls across networks by as much as 69 percent to 34.92 shillings (2 U.S. cents) a minute from March 1 to boost competition. The regulator will decide on the magnitude of the reduction this month, according to spokesman Innocent Mungy.
“We have raised concerns with the significant reduction proposed in March 2013 and the basis by which the reduction has been proposed,” Vodacom Tanzania Ltd. Managing Director Rene Meza said in e-mailed responses to questions yesterday from Dar es Salaam, the country’s commercial hub. “It is important that interconnect charges are designed to reflect the actual costs of mobile operators and the impact that the reduction will have on investment plans by Vodacom and other national operators.”
Tanzania has 46.8 mobile subscribers per 100 people, compared with an average of 61.6 in neighboring Kenya and 100.5 in South Africa, the continent’s largest economy, according to data published on the website of the Geneva-based International Telecommunications Union. Tanzanian subscribers spend an average of 56.7 minutes on domestic calls a month, while Kenyans use 84.4 and South Africans use 137.9, the data shows.
Vodacom Tanzania is the country’s biggest mobile-phone operator with 9.2 million subscribers, according to Meza. The company began an 18-month, 100 billion-shilling investment program in December 2011. Its competitors include Bharti Airtel Ltd. (BHARTI)’s subsidiary, with 6.4 million customers, and Millicom International Cellular SA (MIICF:US)’s unit, known as Tigo Tanzania, with 5 million, according to the TCRA.
The regulator said the planned reduction is based on a cost survey it commissioned auditing firm PWC Tanzania Ltd. to conduct among telecommunications companies operating in East Africa’s second-biggest economy.
“We are doing this to encourage competition in the sector, and to ensure calling is affordable to consumers,” Mungy said on Jan. 18. The TCRA has reduced interconnection rates from the equivalent of 7.32 U.S. cents in 2010 to their current level, according to data on its website.
Meza said Vodacom Tanzania is also in talks with the regulator about plans to introduce number portability in Tanzania, a system in which mobile-phone owners can retain the same phone number when switching operators.
“Our experience with mobile-number portability is that it is a complex process and if rushed, and not done in a structured and planned way, will have negative impact on the customer experience and industry,” Meza said. “Our focus is work with TCRA and industry to do this in a structured and planned way.”
The regulator is discussing number portability and expects progress on the policy this year, according to Mungy.
Beatrice Singano, communications manager at Airtel Tanzania, said she couldn’t immediately comment. Calls to Tigo’s offices seeking comment weren’t answered.
Vodacom Group, based in Johannesburg, is the largest provider of mobile-phone services to South Africans. The company is 65 percent owned by Newbury, England-based Vodafone Group Plc. (VOD) Vodacom’s shares climbed 0.2 percent to 125.06 rand in Johannesburg. The stock has risen 0.9 percent so far this year.
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