He began by posing the question, ‘What is Fair Competition?’. He said that he would not abuse the conference platform in responding to recent allegations from alternative long distance operators.
He reminded that this was his third speech at Arena, the first being May 2005, during which he had committed that if Oger Telecom was successful in the 55% block sale of Turk Telekom, the company would support competition. ‘We said we would promote competition, and that we would not use delaying tactics – in that regard we have met all the regulatory obligations, including signing agreements with new licensees, filing our costs, and particularly taking specific steps to assist the smaller operators, under the direction of the Telecommunications Authority.’
He also reminded that in that same conference he emphasized the need to rebalance the voice tariffs of TT, and was glad to have obtained regulatory approval for this, as the sustainability of the company is severely compromised with a high ‘access deficit’, where the fixed fees don’t cover the cost of access.
He stated that on this day he wished to speak about fair competition in the mobile sector, to be as objective as possible.
He said, ‘Fair competition should be tested with simple arithmetic, and not through philosophical ideas. So I would like to discuss two important competition concepts: predatory pricing, and cost-based interconnect.’
He went on to say: we hear about alternative UMTH operators making small profits, who are at risk, yet they make very small investments. Without elaboration he invited the audience to look at the levels of investment made by Aria and Aycell, reminding that after more then six years, Avea has not made profit, despite major investments? Also, they paid jointly 10 times the license fees paid by Turkcell, yet they were denied national roaming, despite legitimate rights in that regard’. He went on to emphasize that is unfair competition, where incumbents deliberately blocked a new entrant, without any regard to the new entrant rights.
He then criticised the high termination rates imposed by Turkcell at outset of competition from Aria and Aycell, without any regard to the real cost of termination, and repeated his statement: ‘this was deliberate unfair competition’.
He then referred to repeated complaints by the competing mobile operators about ‘predatory pricing’, namely where retail tariffs are below actual cost, or the interconnect charge (which is meant to be cost based).
‘When complaints are raised on this, Turkcell responds that these are only special promotions, and don’t apply to their full customer base. I therefore propose that a simple calculation be made. For example, for voice services: add total voice retail revenue, and divide by the total originating minutes, to compute an ‘ average retail price per minute’.
‘Now divide the voice termination charge, which was recently reduced from 14ykr to 13.6ykr by the average retail price per minute, and express as a percentage. You should derive a reasonable number, which is a measure of ability of competing operators to compete at small market shares; and please compare TT’s rate and Turkcell’s rate – you will discover who is pro-competition, and who is anti-competition’.
He cautioned that all such benchmarking should be done with care, and in fact criticised the practise of benchmarking, particularly absolute termination charges of EU operators, which is being followed by the regulator, reminding that the regulations require ‘cost-based’ charges, and that benchmarking should only be used in cases where costs are not available.
He continued to say, ‘for those who really have to benchmark due to lack of cost data, I invite them to carry out the calculation suggested, and then benchmark with European operators – you will get a very different picture from what is repeatedly broadcast about the low interconnection charges of Turkcell – in fact, this proves that the current termination charge is way above their real cost, even on a benchmarking basis, and that they are using it to deliberately block competition’.
He then gave the example of recent SMS charges by Turkcell, to students. ‘As an operator, TT would get better prices as a customer of Turkcell than an interconnecting operator – yet the termination charge should be cost-based. So they are either overcharging us for termination, or they are selling to their customers below their real cost; both practises are not correct’.
He referred to recent statements by Turkcell CEO that it was other GSM operators who were not offering real prices, but rather only special campaigns.
Yet, in case Turkcell use their old excuse on termination rates, namely that these the 5000 SMS tariff being advertised by them is a limited campaign, and not a real tariff, Doany said: ‘a similar calculation may be made for the total retail revenue from SMS, divided by the number of originating SMSs, to derive an average price per unit, and then compare that with the termination charge per SMS – clearly the cost of interconnect is way above Turkcell’s real cost’.
He referred to a recent press report in Aksam, in which he was quoted as saying that Turkcell was a model company to TT, confirming that the quote was in fact correct, which he made in relation to their management quality, their successful development domestically, and also internationally. But he said, ‘when it comes to Turkcell’s anti-competitive behaviour, we invite them to respect the regulations like TT does – we are both SMP operators, and are subject to the same obligations, which we respect in full’
He ended his statement reminding that he didn’t want to give any numbers, and confuse anyone, but had two simple messages:
‘If you must benchmark, please also consider ratio of the termination charge to the average retail price per unit, as you will get very different results from just comparing absolute levels, which expose the reality about where Turkcell interconnection charges are.
He ended by saying: Please, let us use cost and not benchmarking, so we avoid all these theoretical comparatives – ie, use real cost-based interconnection charges, and suspend anti-competitive behaviour’.