Nashua Mobile, the independent telecommunications service provider in the Reunert Group, is moving ahead aggressively with new partnership agreements and the development of new products to prepare for reductions in mobile interconnect rates over the next three years.
The company is one of the largest providers of least cost routing (LCR) solutions to the market. Lower mobile interconnect rates could undermine the business case for traditional LCR over the next three years. Nashua Mobile is ready to help customers to make sense of what this change in the market means for them and to help them transition to new solutions and products when it makes sense to do so.
Tim Walter, General Manager for Product and Marketing, Nashua Mobile, says that Nashua Mobile is already advanced in its plans to introduce new products and services to its business as it prepares for a transition in the South African telecommunications market.
The market might be changing, but Nashua Mobile sees many exciting new opportunities for its business, its customers and its dealers as a result of more competition at both the service and infrastructure levels of the market.
Says Walter: “LCR revenues have already been impacted by a voluntary cut the mobile operators made to interconnect rates from R1,25 to 89 cents per minute earlier this year. Retail rates have remained constant, which meant that we could still offer our customers savings of around 20% on their cellular bills.”
“Icasa wants a further cut in the interconnect tariffs to 65 cents, which is currently the topic of debate between the regulator and mobile operators. If the retail rate remains constant, LCR will remain a viable product,” says Walter. “In the longer term, Icasa’s plans to force interconnect rates down to 50 cents by 2011 and to 40 cents by 2012 could result in LCR services becoming obsolete.”
All three cellular networks are fighting against the new interconnect structure that Icasa wants to phase in by 2012, which means that interconnect tariffs may be reduced by a lower rate over a longer period of time or that the implementation of the new tariffs will be delayed by legal action from the operators.
“Whatever happens, we believe that interconnect fees will be forced down dramatically over the next three years. That will have a negative impact on our revenues in the short term. But in the medium and long term, we will make up for lost LCR revenues by introducing innovative new products to the market,” adds Walter.
Walter says that employees in the Nashua Mobile LCR division are already being trained in new technologies to support the launch of new products and services in the months to come. The company is also working closely with its dealers to help them skill their employees to resell new technologies and services it will soon introduce to the market.
“For now, customers using LCR will still enjoy significant cost-savings from the technology, but they will not be as high they were in the past,” says Walter. Businesses should gradually phase LCR out when the business case no longer makes sense to use the technology.
“Telecommunications users should be alert to the fact that they will be offered a number of service and product offers in the months to come as service providers scramble to protect their revenues. Many of these offerings will not be as attractive as they appear,” says Walter.
“For example, a customer may be offered a seemingly attractive call rate on it’s telecommunications traffic that does not take into account hidden costs such as line rentals, minimum usage, and maintenance or administration fees that it will have to pay. These fees must be added together and divided by the minutes the customer will expect to use to give a true reflection of what the actual rate per minute will be that the customer will pay.” says Walter.
Walter says that the situation in the market is still so fluid that business customers should be wary of entering long-term contracts with service providers until it is clearer what the real impact of lower interconnect fees will be on the market.
“As an independent service provider, Nashua Mobile can help customers to make sense of this complex environment and choose the products and services that will deliver the best value and cost-savings to their businesses,” he adds.