Competition Commission Refers Cell C Complaint Against MTN for Price Discrimination To

PRESS STATEMENT

30 July 2007

Competition Commission refers Cell C complaint against MTN for price discrimination to Tribunal

The Competition Commission has referred its finding of price discrimination against MTN to the Competition Tribunal for adjudication. The referral arises from a complaint of anti-competitive conduct by MTN in relation to the interconnection fee it charges Cell C for its Community Service Telephones (CSTs).

CSTs are telephones available for public use, operating on the mobile telecommunication networks, which are placed in areas where there is limited access to fixed line telephones. CST users are generally classified as being part of Living Standards Measure (LSM) categories 1 – 6, with an income of less than R4000 per month.

Interconnection refers to connection that occurs between the various telecommunication networks to enable subscribers of one network to call and receive calls from subscribers of the other networks.

In terms of mobile phone operators universal service obligations - imposed by the Independent Communications Authority of South Africa (ICASA) and set out in their respective licenses - each of the cellular network operators is obliged to roll-out CSTs in ‘under-serviced areas’ as defined in their licenses. A reduced interconnection fee is charged for CST areas. In its complaint Cell C alleged that whereas MTN charges Vodacom the reduced CST interconnection rate in respect of its CST phones, it charges Cell C a commercial interconnection rate in the same areas that it charges Vodacom the CST rate.

In terms of its license obligations, Cell C is obliged to roll out 52 000 CSTs in ‘under serviced areas’ over a period of seven years, while Vodacom and MTN were to roll out 22 000 and 7 500, respectively.

Cell C determined potential locations for the placement of CSTs with reference to a study of countrywide fixed line teledensity compiled by the Human Sciences Research Council (HSRC). ICASA approved the method used by Cell C to determine where to place its CSTs as well as the proposed roll out on the Vodacom network.

However, MTN objected to the placement of CSTs by Cell C, alleging that Cell C had rolled out CSTs in areas which did not fall within the ambit of ‘under serviced areas’. As a result, MTN is charging Cell C the commercial interconnection rate of R1.25 per minute during peak periods and R0.77 per minute during off peak periods and not the CST interconnection rate of R0.06 per minute, for all calls made from every Cell C CST to phones on the MTN network. On the contrary, MTN charges Vodacom the agreed upon CST interconnection rate of R0.06 per minute, when a user of a Vodacom CST, situated in the same vicinity of certain Cell C CSTs, phones MTN.

The Commission found that the conduct of MTN of charging Cell C the commercial interconnection rate in the same areas that it charges Vodacom CST rates amounts to price discrimination. Price discrimination occurs when a dominant firm, without any objective justification, charges different prices to purchasers for equivalent transactions. Price discrimination is prohibited by section 9(1) of the Competition Act if it is likely to result in a substantial lessening of competition. The Commission has found that MTN’s conduct is likely to have the effect of substantially lessening competition between the telecommunication network operators.

ENDS Further Prepared by: FD Beachhead Dani Cohen - 021 487 9000 / 082 897 0443 / [email protected] Jennifer Cohen- 011 214 2401/ 082 468 6469/ [email protected]

On behalf of: The Competition Commission

Further info: Thulani Kunene, Head of Enforcements and Exemptions 012 394 3200 / 084 734 4179