Safaricom’s Steve Chege (left) and the CA’s Christopher Kemei. photo | file
Summary
- The Communications Authority last Friday gave the clearest signal that it plans to implement the findings of a study it commissioned in the wake of mounting concerns that the operating environment was stuck against smaller telecom firms.
- Both Airtel, the second largest operator, and Telkom, the third, welcomed proposals to regulate tariffs.
- Safaricom warned that the move could be counterproductive as it could lead to an increase in calling rates.
- If implemented, the market leader will have limited space to charge differential rates for on-net and off-net calls.
Mobile phone calls and text messages could cost more in coming
months if the regulators adopt the proposed introduction of price
regulation in the telecoms sector.
Telecoms sector
regulator, the Communications Authority of Kenya (CA), last Friday gave
the clearest signal that it plans to implement the findings of a study
it commissioned in the wake of mounting concerns that the operating
environment was stuck against smaller telecom firms.
Both Airtel, the second largest operator, and Telkom, the third, welcomed proposals to regulate tariffs, but Safaricom
warned that the move could be counterproductive as it could lead to an increase in calling rates.
Telecoms
market observers argued that the proposed regime could instigate
collusion among operators to increase prices above current rates
confident that rivals cannot go below the regulated rates.
Mobile operators Airtel and Telkom Kenya have in the past wanted
market leader Safaricom to pay a higher fee for calls and texts
completed on rivals’ networks, but the CA has been hesitant to go down
the price controls route.
Analysys Mason, the
consultants that the CA hired to study telecoms market dominance, have
tried to address the concerns by proposing active regulation of
Safaricom’s standard tariffs and permanent loyalty schemes, but
Safaricom has dismissed the move as retrogressive.
“Safaricom
standard tariffs, permanent loyalty schemes and promotions (including
non-tariff promotions such as lotteries) should be capable of being
profitably replicated by a reasonably efficient competitor,” the report
says.
"Retrogressive"
Safaricom
said retail price controls as proposed in the report are retrogressive,
arguing they will result in higher retail prices for Safaricom
customers.
Steve Chege, the Safaricom Corporate Affairs
director, said that the telecommunications sector is “a liberalised and
competitive” and that operators should be left to compete on quality
and price of services.
Mr Chege said innovation and
network investment plays a key role in determining customer choice and
should not be killed by price controls.
“The
requirement that Safaricom can only roll out services that are
replicable by its competitors will stifle our ability to innovate around
customers’ calling habits to offer them tailor made pricing like
Tunukiwa, which have been a big hit with customers,” he said.
“We
also believe that another recommendation of the report that seeks to
curtail Safaricom’s ability to advertise is anti-consumer and
unjustified,” he added.
If implemented, the market leader will have limited space to charge differential rates for on-net and off-net calls.
“Safaricom
may not charge differential rates for on-net and off-net calls under
any circumstances and all marketing materials relating to airtime
bonuses must make clear that the bonuses can be used for off-net as well
as on-net calls,” the report says.
Both Telkom Kenya and Airtel have been making losses even as
rival Safaricom posts runaway profits every year. Safaricom charges Sh4 a
minute for calls within and outside its network between 8 a.m. and 10
p.m. and Sh2 a minute for rest of the hours.
Last
March, Airtel Kenya introduced a voice calls package that cut by a third
to Sh2 per minute call charges from its subscribers to rival networks
in an effort to tap new subscribers.
Telkom Kenya cut off-net calling rates for specific packages from Sh3 to Sh1.80 per minute.
The
CA now says that it will move to regulate Safaricom’s tariffs in line
with the findings of the competitions study that found the operator
dominant.
“The Kenya Information and Communication
(Tariffs) Regulations, 2010, define regulated services as those offered
or supplied by a licensee - a) in a market or market segment that is
uncompetitive; or b) where the licensee has been declared dominant in
the relevant market or market segment,” said CA last week while
announcing the impending plans to regulate tariffs.
“This
means that tariffs of players found to be dominant in specific relevant
markets, will be regulated. However, the impact and need for these
remedies will be reviewed after some period, to determine
whether they’ll still be appropriate and necessary,” added CA in a
statement.
“Club effect”
Airtel
and Telkom Kenya have accused the market leader of using its market
power to lower prices to a level that condemns competitors to losses.
The
market leader has also been accused of promoting the “club effect” that
enables the largest network to offer lower calling rates to other
numbers in its network.
The smaller operators last Friday welcomed the proposed regulations arguing it could help level the playing field.
“By
virtue of its financial muscle, a dominant operator is able roll out
promotions that other operators cannot match without incurring losses.
Obligating a dominant operator to ensure that their promotional tariffs
and loyalty schemes are replicable by the other operators on a large
scale will act as a cautionary measure for anti-competitive behaviour
through predatory pricing,” Airtel Kenya said in a statement.
Safaricom
remains Kenya’s telecoms market leader with 29.4 million subscribers or
71.9 per cent market share according the latest market report.
Airtel Kenya is a distant second with 6.1 million (14.9 per cent) while Telkom Kenya has 3.4 million (8.4 per cent) subscribers.
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