MTN Fined Over Data Bundle Price Hike

Telecoms regulator, the Independent Communications Authority of SA (ICASA), has fined MTN R5 million ($340,529.86) for failing to comply with the law when it increased the price of one of its data plans.

However, R2 million ($136,211.94) of the fine has been suspended for three years.

“ICASA would like to confirm that indeed a fine of R5 million ($340,529.86) was issued to MTN for contravening Regulation 9 of the Standard Terms and Conditions, of which R2 million ($136,211.94) is suspended for three years as from the date of issue of the council’s order in this matter,” says Paseka Maleka, ICASA’s spokesperson.

“The condition of the suspension is that MTN is not found to have contravened the same regulation again within three years of the issue of this judgment. The remaining fine of R3 million ($204,317.92) must be paid to ICASA within 90 working days after the issue of this order.”

In February, ICASA issued a statement saying its Complaints and Compliance Committee (CCC) would hold public hearings in respect of MTN’s contravention of Regulation 9 of the Standard Terms and Conditions, wherein the licensee failed to comply with the part of the regulation that requires notifying the authority at least seven days prior to the provision of a charged service, i.e. Social Bundle Amendment – WhatsApp Monthly 1GB, a service MTN provided at a revised price of R30 inclusive of value-added tax.

In this case, ICASA charged, MTN implemented price adjustment before the end of the seven-day period

According to the regulations on Standard Terms and Conditions for Individual Licenses, any person that contravenes regulations 7, 8, 9 and 10 is liable to a fine not less than R100 000 ($6810.60) but not exceeding R5 million ($340,529.86) or 10% of the licensee’s annual turnover – whichever is the greater – for every day or part thereof during which the offence is continued.

“MTN contravened Section 9 (1) of the regulations which states that a licensee may not provide any service for a charge, fee or other compensation, unless a price(s) for the service and other terms and conditions for the provision of such service have been filed with the authority at least seven days prior to the provision of the said service,” said ICASA at the time.

Undermining authority

ICASA felt strongly that the actions and contraventions by MTN effectively undermined the authority’s very efforts to reduce the cost of communications in SA and the implementation of consumer protection regulations aimed at promoting transparency and prohibiting unfair business practices in the provision of communication services.

In a statement, MTN says last week the CCC’s Independent Administrative Tribunal released its report on the process followed in MTN’s repricing of its WhatsApp bundles in July 2018.

The CCC’s report was approved by the Council of ICASA on 3 September 2019.

It notes that in April 2018, MTN launched its social bundles and introduced a monthly WhatsApp bundle of 1GB for just R10. This unprecedented pricing aimed to further drive down the cost of communicating for South Africans, says the company.

The public’s response was exceptional, says MTN, adding that WhatsApp usage on the MTN network increased by 300% in just eight weeks. An unintended consequence of the low-priced WhatsApp data has been an extraordinary increase in demand on MTN’s 3G network, it notes.

MTN’s dual data strategy has seen consistent and sustained investment in both its 3G and 4G networks over the past few years to deliver a world class network experience, the company says, pointing out that at the time, MTN urgently invested a further R200 million in the 3G network, to accommodate the huge spike in traffic that was being driven by the demand for WhatsApp.

On 18 June 2018, MTN explains that it advised ICASA that it intended to change the pricing from R10 to R20.

“This price increase was delayed in the hope that additional network interventions may have provided some relief. Unfortunately, the situation did not improve and the stability of the 3G network remained significantly at risk,” says Jacqui O’Sullivan, Executive for Corporate Affairs at MTN South Africa.

The operator notes that on 12 July 2018, MTN notified ICASA that a more significant price increase for the WhatsApp bundle, to R30, would be necessary to provide the immediate relief that the 3G network required.

“MTN followed this notification to ICASA on 13 July 2018, with a letter to the CEO of ICASA, requesting leniency on the ICASA requirement that all pricing changes may only be effected seven days after the notification of the regulator,” O’Sullivan says.

Significant risk

The letter, sent by MTN SA’s CEO, Godfrey Motsa, highlighted the significant risk MTN’s 3G network was facing, because of the extraordinary spike in traffic and requested leniency to effect the pricing changes before the seven-day notice period had passed, she adds.

MTN did not receive a response to the letter and on 16 July, MTN introduced the pricing change, says the operator.

“MTN respects the role of the regulator and that of its Compliance and Consumer Affairs division. MTN is committed to compliance and to maintaining good relationships with all stakeholders and the decision to proceed, without some sort of ICASA-issued condonation, was not made lightly.

“At the time, we believed this was the only action to ensure the continued functionality of MTN SA’s 3G network and considering the risk posed to millions of customers had that network failed, the difficult decision was made.

“We were very aware of the required ICASA timing, which is why we applied for leniency, but this was a tough situation, and, at the time, we did what we felt necessary to protect the connectivity of millions of South Africans,” O’Sullivan notes.

MTN says it has considered the content of the decision. MTN holds that the penalty applied should be proportionate to the transgression and that it should be rational and reasonable considering the circumstances.

For this reason, amongst others, MTN will be taking the decision on review to the High Court, the operator concludes.