Huge Group today welcomed the announcement by ICASA of an impending drop in interconnect rates between telecommunications providers in South Africa.
Huge Telecom, a significant wholesale client of the mobile network operators, supplies mobile voice services to 6,000 clients across South Africa, totaling some 500 million mobile airtime minutes per annum.
“This reduction is great news for us and the broader LCR industry,” says James Herbst, CEO of JSE-listed Huge Group.
“This confirms and enhances the inherent value of our Huge Telecom business and we foresee the potential for significant financial benefits as a result of the reductions.”
The industry regulator, ICASA, has announced that from the 1st March 2011 the peak mobile termination rate will drop to 73 cents per minute, from the current level of 89 cents per minute, the peak national fixed line termination rate will decline to 28 cents per minute, and the peak local fixed line termination rate will drop to 20 cents per minute. Further reductions are to be enforced in 2012 and 2013.
Contrary to the view of some market participants, Herbst says that the Least Cost Routing industry will be an immediate beneficiary of the regulated price reductions. He expects market forces to drive price point parity in wholesale termination rates, with a positive impact on revenues and profits.
A reduction of 19 cents per minute in input costs could translate into additional profit of up to R100 million per annum for Huge Telecom and additional benefits to Huge Telecom’s clients.
Huge Telecom’s LCR model has deliberately avoided the large investment in CAPEX infrastructure required by a VoIP operation, whilst delivering a competitive offering as a leading player in its target market.
Herbst says, “Huge Telecom welcomes lower termination rates on the basis that lower termination costs will drive down input costs, increase demand, and deliver growth in the voice traffic generated by Huge Telecom’s 6,000 clients.”
“The current business models involving the provision of VoIP generally require the commissioning of diginet leased lines, copper cables supplied by Telkom that serve the purpose of mimicking the copper last mile. New technologies are reducing the reliance on the copper last mile to homes and businesses, with an emphasis on a wireless last mile. Huge Telecom, with its 32,000 network and customer premises equipment components, is a current provider of the equivalent of a wireless last mile. The new era is wireless and voice over IP over a wireless environment. These reductions prove that the Huge model is the way of the future,” Herbst said.