Download presentation
Presentation is loading. Please wait.
Published byRosa Leonard Modified over 7 years ago
1
11 PRESENTED BY: Greg Hatfield & Siyabonga Madyibi DATE: 12 October 2009 Interconnect pricing
2
Internet Solutions Overview Market & Process Review
22 Agenda Agenda Internet Solutions Overview Market & Process Review Suggested MTR reduction Rationale Price structure Ideal Impact on Retail Pricing Plausible Industry scenario Questions & Discussion
3
Internet solutions company overview
33 Internet solutions company overview Founded 1993 ISP Converged Communications Services Provider Pioneers of South African technology solutions Fibre optic links (1994) Mobile Connectivity Switched VPN (1997) Applications Hosting (2003) MPLS VPN, VRAS, ASP / SaaS (1999) Wireless Hotspots (2005) VoIP (2005) Built SA’s largest online community 6,500 corporate (>15,000 offices) 30,000 SME’s 100,000 non-business users
4
44 IS footprint
5
55 Overview of mtr process IS applauds the Portfolio Committee on its intervention Culminations of long, tortuous road started before ECA promulgation Competition is key to industry effectiveness Interconnect rates are key to competition Incumbents have no incentive to facilitate competiion Incumbents possess all the negotiating strength Direct negotiations fail
6
66 Market overview MNO’s dominate with > 40m users Interconnection terms set independent of competition Interconnect rates increased by 500% New entrants impotent to force MTR downwards ICASA recognise this abusive position Pro-competition regulatory framework being pursued
7
Key competitor in Fixed-to-mobile market LCR still prevalent
77 Is’ voice business Launched Feb 2005 VoIP based Reach Over 2,200 company branches use IS VoIP Over 320 companies use IS VoIP Carried approximately 450m minutes last year Key competitor in Fixed-to-mobile market LCR still prevalent Channel model for consumers and SME’s
8
15% p/a reduction R0.27 over 5 years
88 Recommended MTR changes R0.60 immediately 15% p/a reduction R0.27 over 5 years
9
99 Rationale Corporate 500 Retail Price R 730 Excl VAT R 640
In bundle minutes 500 Cost per Minute (Excl) R 1.28 SP Discount (up to) 28% Discount per minute R 0.36 Net Cost Per Minute R 0.92 Connection Incentive Bonus per SIM R 3,500 Monthly over 24 months R 146 Effective CIB Subsidy per minute R 0.29 Net Revenue per Minute R 0.63
10
10101010 qualifications Many variables Different package pricing
Subscribes not using all their “free” minutes Subscribers using more than their “free” minutes SP’s not reaching the full 28% discount 20% error rate: Net Retail Revenue = R0.75 EBIT margin = 30% “Accounting cost” per minute <= R0.44 ICASA research produced similar value MTR of R0.60 – R0.80 is not a material change IT’S AFFORDABLE!
11
industry Structure Current Wholesale - R1.25 Net Retail - R0.63 Required Wholesale - R0.27 Retail - R0.63 Benefits Challenger operators can compete Fixed to mobile market moves to interconnect Spectrum availability increases by 20% - User experience - 3G performance - Mobile TV
12
Retail price changes The MNO’s need to remain financially viable Certain retail prices must provide that viability ‘Tolerable’ offerings Contract packages - Lower rates per minute Currently contribute the bulk of MNO profits 15% market penetration ‘Intolerable’ offerings Prepaid services - Higher rates per minute Lower profit contribution 85% market penetration – poor majority
13
Plausible industry scenario Required Changes MTR drops to R0.60 immediately Prepaid retail pricing drops significantly Contract retail pricing remains unchanged MNO Impact Interconnect and prepaid revenue declines Contract revenue maintains economic viability End User Cost Reduction Poor majority (prepaid) Fixed-to-mobile market (R8b) for businesses
14
conclusion The interests of all major stakeholders can be met, particularly the majority of South African citizens, by this plausible industry outcome IS urges all appropriately mandated organisations to construct this outcome urgently
Similar presentations
© 2025 SlidePlayer.com. Inc.
All rights reserved.