Vodacom‚ MTN shed R31bn in market value in 2 days

MTN has shed about R17bn‚ with Vodacom losing about R14bn.

Vodacom and MTN shares have fallen about 7% and 5% respectively as Vodacom is more exposed than MTN to the drop in interconnection rates. The other difference is that MTN has a far bigger market capitalisation than Vodacom.

"In Vodacom's case‚ South African mobile termination revenue currently accounts for 6.5% of total group revenue. So a 50% cut in year one could reduce revenue by over R2.5bn. This is a high-margin business for Vodacom and hence one could expect a negative earnings impact‚" RMB Private Bank portfolio manager Nick Crail said.

Last week's proposal by the Independent Communications Authority of SA (Icasa) will see the mobile termination rate - the fee cellphone network operators pay to carry each other's calls - drop from 40c to 20c in 2014‚ reaching 15c in 2015 and a final 10c in 2016.

"The new proposed guide path is negative for both Vodacom and MTN‚ and beneficial to smaller operators such as Telkom and Cell C‚" Crail said.

"Only time will tell what impact these cuts will have on consumer prices and the amount of traffic going through the network as there are still other challenges facing operators such as availability of spectrum‚" he said.