Inside Safaricom offers that rattled regulator, rivals

Inside Safaricom offers that rattled regulator, rivals

Safaricom #ticker:SCOM repeatedly set the prices of its promotions lower than the actual costs of the calling services, harming competitors, its rival Airtel has claimed.

The alleged sustained cutting of prices below that of competitors and below actual costs of services made it hard for Airtel to operate profitably and constituted anti-competitive behaviour, Airtel says.

This is part of the submissions by Airtel before the Communications and Multimedia Appeals Tribunal. Airtel claims Safaricom has abused its market power in its bid to edge out rivals.

The landmark case looks set to test Kenya’s resolve to lower the cost of calls and heighten acrimony between market leader Safaricom and its rivals Airtel and Telkom.

Airtel and Telkom Kenya have thrown their weight behind the Communications Authority of Kenya (CA) in an appeal filed by Safaricom.

Airtel is among operators who are backing a decision by the CA to cut mobile termination rates (MTR) to Sh0.12 per minute from the current Sh0.99 per minute.

MTR are the charges levied by a mobile service provider on other telecommunications service providers for terminating calls on its network.

Airtel and Telkom have criticised Safaricom for seeking to scuttle the recently announced reduction in MTR, accusing the leading telco of only being interested in protecting its revenues from rivals.

To demonstrate the alleged predatory pricing, Airtel for instance cited Safaricom’s ‘Tunukiwa promotion’ which it argued was well below the current cost per minute compared to the cost of MTRs of Sh0.99 per minute.

Under the promotion accessible by dialing *444*2#, Safaricom gave their customers what it called ‘Tunukiwa’ minutes.

The offers made available, Airtel says indicate the effective per minute prices is between Sh0.50 and Sh0.09 which is below the known per minute cost, translating into predatory pricing.“Safaricom has documented control of over 60 percent of the market and traffic market share and such promotion will clearly increase the already existent club effect and thereby distort the market,” says Airtel managing director PD Sarma.Safaricom has been running promotions and special offers that has seen it price its per-minute voice services at a range of between Sh0.2 and Sh1, according to an analysis by the regulator.The Communications Authority has also admitted Airtel’s concerns.The regulator argues that it considers Safaricom’s ability to offer rates as low as Sh0.2 per minute, an indication that the telco’s cost of production is much lower than Sh0.99, the rate before the contested revision.In the telco’s ‘Stori Ibambe 500 percent bonus’ promotion, […]

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