MTN SA Heading to Court to Fight R5M Fine

MTN South Africa plans to head to the High Court to fight a R5 million (US$340,000) penalty from the Independent Communications Authority of South Africa (ICASA) for repricing a 1GB WhatsApp bundle last year without the proper regulatory approval.

ICASA Spokesperson Paseka Maleka confirmed with Connecting Africa via email that a fine of R5 million ($340,000) was issued to MTN "for contravening Regulation 9 of the Standard Terms and Conditions Regulations".

The regulation 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 regulatory authority at least seven days prior to the provision of the service.

Maleka said that MTN implemented a price adjustment for its WhatsApp Monthly 1GB bundle before the end of the seven days period without prior approval by ICASA, raising the price of the bundle from R10 ($0.68) to R30 ($2.04).

He confirmed that R2 million ($135,800) of the R5 million fine is suspended for three years, on the condition that MTN does not contravene the same regulation again within the next three years.

"The remaining fine of R3 million ($204,000) must be paid to ICASA within ninety working days after the issue of this order," which was September 3, 2019.

The MTN Group made revenue of R134.6 billion ($9.1 billion) for the year ended 31 December 2018 and the South African operation's revenue was almost R44.7 billion ($3 billion).

MTN is facing a $340,000 fine for repricing a 1GB WhatsApp bundle without the proper regulatory approval.

3G network issues
MTN also gave Connecting Africa its side of the story explaining that it had asked the regulator for leniency in this particular case because it had found itself in "a tough situation" due to the instability of its 3G network.

MTN said that in April 2018 it launched its social bundles and introduced a monthly 1GB WhatsApp bundle for "the unprecedented pricing" of just R10 ($0.68).

"The public's response was exceptional. 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," explained Jacqui O'Sullivan, executive for corporate affairs at MTN South Africa, in an emailed statement.

"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. At the time, MTN urgently invested a further R200 million ($13.6 million) in the 3G network, to accommodate the huge spike in traffic that was being driven by the demand for WhatsApp," she added.

On June 18, 2018, MTN advised ICASA that it intended to change the pricing from R10 ($0.68) to R20 ($1.36).

"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."

So, on July 12, 2018 MTN notified ICASA that a more significant price increase of the WhatsApp bundle, to R30 ($2.04) would be necessary, to provide the immediate relief that the 3G network required. MTN followed this on July 13 with a letter to the CEO of ICASA, requesting leniency.

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.

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

"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," O'Sullivan said.

"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."

MTN believes 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 said it will be taking the decision on review to the High Court.

When the matter will head to court is still unclear.

— Paula Gilbert, Editor, Connecting Africa