Johannesburg - With the South African cellular market at 53 percent penetration, the country's second-biggest operator, MTN, wants the cellphone handset subsidies to be scrapped.
The are about 25 million cellphone users in the country, of which 4 million are contract cellphone users.
Speaking at the hearing on handset subsidies before the Independent Communications Authority of SA (Icasa) yesterday, MTN's head of regulatory affairs, Nkateko Nyoka, said operators should compete on services they offered to the customers as the market was reaching maturity.
MTN said intervention by the regulator was not an appropriate way of phasing out subsidies, which should rather be an industry-led process with the involvement of Icasa.
Icasa lodged an inquiry into cellphone subsidies, which tie users into two-year contracts and prohibit them from switching to other operators.
The regulator is also probing high costs of cellphones and fixed-line calls, and mobile number portability.
MTN said the process should be done by all the three cellphone operators using an industry code of good practice as a guideline.
But MTN warned that "it would be a question of who goes out first".
Cell C, which also supports a ban on handset subsidies, said that the regulator should enforce the ban through regulation.
It proposed transparency as an interim solution, which should have immediate effect, followed by a limitation on the level of subsidisation and later a phased elimination of subsidies as the ultimate solution.
As a late comer into the cellphone market, Cell C said it had to adopt the prevailing marketing practices and services, including the provision of subsidised handsets to post-paid subscribers.
"In a mature market, handset subsidies merely stimulate handset replacement and not necessarily subscriber growth," said Cell C in its submission to Icasa on an inquiry into cellphone subsidies.
The country's biggest cellphone operator, Vodacom, opposed the ban as it said handset subsidies encouraged the demand for new-technology that would help bridge the digital divide.
The competition commission said in its discussion document to Icasa that handset subsidies were "problematic", and that specific regulations should be developed.
It said Icasa should only consider regulating handset subsidies after "careful consideration of their competitive and consumer welfare effects".