Daily ShareChat: Telecom

By Jenny Ruth

Friday 13th May 2011

The cuts to mobile termination rates the Commerce Commission announced were roughly in line with expectations, says Greg Main, an analyst at First NZ Capital.

The commission has ordered that termination rates for phone calls to a different network drop to less than four cents by April 1, 2012 with further reductions until 2014. It ordered termination rates for text messages to drop immediately to 0.06 cents.

Telecom's call termination rates are currently about 15 cents a minute while Vodaphone's are about 17 cents a minute.

"There was a risk the cuts may have been made immediately so the fact a one-year glide path is being is being used may be a small win for operators," Main says.

"The key positive is the commission has not yet become directly involved with the on-net/off-net pricing dispute," he says.

"However, the commission notes it is concerned about the price of calls and texts between people on different networks being significantly higher than calls and text between parties on the same network."

While Main didn't expect much of an impact from the announcement, he says he expects continued competitive price pressure. "The key issue then for operators is whether increased usage, data and other services can help offset some of the expected unit price3 decline."

Rating: Neutral.

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