Link between termination rates and retail prices in Namibia, Kenya and South Africa
Termination rates and mobile retail prices do not constitute a two-sided market and termination rate reductions will not lead to a so-called waterbed effect. The pass-through to consumers of MTR savings is not automatic, and that relatively small reductions in termination rates do not provide new entrants with sufficient room to compete. There is no unidirectional link between termination rates and retail prices, as is often claimed by those defending the status quo of arbitrarily high termination rates. Setting retail prices is not a question of revenue replacement but rather one of profit maximisation in a competitive environment where the choices of one operator influence the revenues and profits of another.
retail prices namibia kenya south africa two-sided markets waterbed effect mobile termination rates