Icasa believes "there is insufficient competition in the handset market", but it will not intervene in the marketing practice of subsidies. Instead, Icasa will force the three mobile operators, Vodacom, MTN and Cell C, to offer shorter, less restrictive contracts. The regulator will also insist that contracts are clearer so consumers understand the details can compare different plans more easily.

Currently customers commit to 24-month contracts but operators will now be required to offer contracts for as little as six months, Icasa said. Contract customers who buy a handset now pay the same airtime rates as those who accept a new handset as part of the contract. Icasa believes that people who do not want a new phone should be offered better terms. Contracts apply to fewer than 10% of mobile users in the country.

The rulings come after Icasa held hearings last year because it suspected that "free" handsets ended up costing consumers dearly through hidden costs in contracts. It was also concerned about the difficulty of working out exact costs and determining which operator offered the best value.

Although Cell C and MTN are both on the record as being against handset subsidies, none of the operators has dared to withdraw the subsidies in isolation, as users would simply sign up with a rival offering the latest hi-tech handset.

Source: Business Day - WDR/Intelecon Regulatory News