The Communications Authority of Kenya (CA) says the recent cut in mobile termination rates will give smaller telecoms operators a better chance at competing with market leader Safaricom, even as it hinted at a further drop in call tariffs.
The sector regulator says in its response to a petition filed by Safaricom before the Communications and Multimedia Appeals Tribunal that it plans to conduct a more detailed network cost study of mobile termination rates (MTR), suggesting it could consider further review.
MTRs are the charges levied by a mobile service provider on other telecommunications service providers for terminating calls in its network.
The CA cut the charge to Sh0.12 per minute from the current Sh0.99 per minute after a six-year freeze, drawing legal action from Safaricom that earns the most from MTR due to its large voice market share of 68.9 percent. The capping was to start on January 1.
Safaricom earns an estimated Sh6.5 billion annually from MTR while paying out Sh2.6 billion to rivals, leaving it in a profitable position while competitors remain in a net losing trade.
The regulator says the revised rates will give small operators greater price flexibility to compete with the market leader- Safaricom and benefit consumers.
“It is our position that due to its size, Safaricom enjoys economies of scale, and their costs are low compared to other small operators. The proposed low termination rate will give small operators greater price flexibility to compete with them,” CA director-general Ezra Chiloba said.
Safaricom sought to quash the regulator’s decision arguing that the charges should instead rise to reflect the true cost of doing business. The tribunal ordered the status quo to be maintained, pending further directions on February 2.
The regulator says the choice of methodology in determining MTRs and fixed v0ice termination rates (FTRs) is its prerogative and cannot be dictated by an operator.
“The review was an interim measure until a network cost study was conducted, and to prevent further market foreclosure given that the study is anticipated to take over one year to conclude and implement,” Mr Chiloba said in a statement filed before the tribunal.
Rival operators Telkom Kenya and Airtel and Consumers Federation of Kenya (Cofek) have since joined the case.Safaricom argues that globally, any reduction in MTRs often leads to a restriction in the rollout of the networks as operators could argue that there is a reduced incentive to expand their networks.It holds that any MTR review […]
