Blaming data costs on operators alone is wrong - MTN on price report

MTN said it had to compensate for a lack of spectrum by spending more than R50bn in the last five years to build a network without any 4G spectrum having been allocated.
MTN said it had to compensate for a lack of spectrum by spending more than R50bn in the last five years to build a network without any 4G spectrum having been allocated.
Image: Gallo Images/Charles Gallo

For more than a decade the government and regulators had failed to release the spectrum  critically needed by the mobile phone industry to lower the cost of communicating. 

That was the view of MTN after the Competition Commission released its  final report on data pricing on Monday.

The report gave MTN and Vodacom two months to reduce mobile data prices or face  prosecution.

MTN said it was not yet able to comment on the detail contained in the report but could make general observations regarding factors driving the cost of data.

It said the government and regulators had failed to release the spectrum - radio frequencies needed to transmit data - that the industry needed to lower costs.

“To simply lay the blame for data costs at the feet of the operators is wrong.”

MTN said it had to compensate for the lack of spectrum in South Africa by spending more than R50bn in the past five years to build a world-class network, providing more than 95% of the population with 4G coverage, without any 4G spectrum having been allocated.

MTN made a comparison with Nigeria, often cited as an example of a developing country with lower data costs than South Africa.

“In South Africa MTN has just 38MHz of spectrum. MTN Nigeria has almost triple that, with 110MHz.”

To counter the lack of available spectrum, MTN had to get innovative with what it had, resulting in significant “refarming” of spectrum so it could keep enhancing its 3G and 4G coverage.

It said the R50bn invested in its infrastructure in the past five years was simply unsustainable. 

MTN believes the majority of spectrum should be allocated to existing operators that were in dire need of capacity.

The company said it made little sense to hand significant spectrum to operators that were yet to be established.

It also argued that the economically efficient way to drive reductions in communication costs had to come from operators with existing large customer bases that could quickly respond with lower pricing for all.

“Industry, policy makers and regulators must collaborate to co-ordinate policy objectives as to how spectrum will be allocated,” said MTN SA chief executive Godfrey Motsa.

He said the company agreed that costs had to fall and competition needed to grow.

“However, the risk is that by breaking the required spectrum into too small chunks or to create middlemen, operators will lose the ability to deliver networks that are economically viable and efficient. Telecoms is a scale business,” said Motsa.

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