INTERCONNECT RATES

Changing the methodology of how Interconnect Rates are determined at MTN Swaziland so as to conform to global best practise



Table of Contents

Introduction3

Background4

Problem Statement7

Research7

Research Objectives9

Research Design9

Variables10

Sample Profile11

Data Collection13

Data Analysis14

Literature Research15

Steps to Set the Rates17

Methods to Determine Rates17

Initial Costs17

The Prospective Costs18

Long Run Incremental Costs18

Distributional Costs19

Cost Efficient Components19

Exclusive Cost19

Efficiency of Determining the Rates20

Field Research21

Implementation22

Limitations24

Action Plan26

Reflection26

References28

Executive Summary

Since 1998, MTN Swaziland has been the only mobile telephone company in Swaziland. Today it has more than 600,000 subscribers, 98% of who are prepaid. Currently, the company ash to decide what methodology is most suitable to determine the interconnect rates so that no additional cost implications arise for the company. To study his, the research undertook the objectives to determine the best procedure in setting the cost and suggesting the board of directors about this change. The interconnection rate per minute is the amount paid by a telephone company to sell a phone call through the network of another operator, who then brings up the call destination. These rates are regulated for the incumbents to allow proper development of competition. The price depends on the remaining work by the operator that carries communication from the point of interconnection to the device. Currently, at MTN the interconnect rates are determined mostly on the basis of historical data, therefore, the management needs to see other methods which are efficient in setting the cost. The research used the qualitative research methodology. Since the nature of this topic is descriptive; therefore the qualitative study design best suits the research purpose. The research used the snowball sampling methodology which allows the investigator to find people that are relevant to the study design. The research utilized the coding and Mnemoing techniques to analyze the data. The study involved interviews with executive management, finance department, and the marketing department of the MTN group operations specially MTN Uganda, MTN Rwanda, MTN Cameroon and MTN South Africa. The field research is in the form of face to face interviews whereas; the literature review provided an assessment of the case studies to understand issues about the topic.

Changing the methodology of how Interconnect Rates are determined at MTN Swaziland so as to conform to global best practise

Introduction

The opening of the telecommunications market necessarily implies the establishment by the public administration body responsible for regulating the sector. There are rules that create a competitive environment and specific conditions favorable to the entry of new players. The telecommunications sector has been characterized, in most countries with the existence of monopolies or oligopolies that control the basic infrastructure of the telecommunications network. The telecommunication a mobile service providers have the right to interconnect its network with the network or incumbents and have more coverage and consequently greater number of customers or subscribers. Today, it is a substantial issue, because the obvious interest of the customers of the new operator who are able to communicate with operator's subscribers already established (www.mtn.com). For this it is importance to promote free competition because interconnection is a matter of public ...