CA to cut mobile call rates after six-year freeze

The Communications Authority of Kenya head office in Nairobi. FILE PHOTO | NMG

By BRIAN NGUGI
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Summary

• The regulator said time was ripe to review the charges commonly referred to as mobile termination rate (MTR) to match shifts in technology..
• Industry data shows that the rate has been falling gradually from a high of Sh4.42 in 2011 to the current Sh0.99.
• The fresh plans to cut the rate could spark a price war should mobile phone operators opt to lower call tariffs for their customers.

The Communications Authority of Kenya (CA) is set to make fresh cuts on the rate mobile phone operators charge each other for interconnecting customers, signalling lower call tariffs.

The regulator said time was ripe to review the charges commonly referred to as mobile termination rate (MTR) to match shifts in technology that have made mobile telephony more efficient.

“Owing to the passage of time, changes in the market as well as the macroeconomic environment, the authority now wishes to carry out a review of the telecommunication interconnection rates using benchmarking technology,” the CA said in a public notice yesterday.

Industry data shows that the rate has been falling gradually from a high of Sh4.42 in 2011 to the current Sh0.99, which has been in place since 2015, marking a freeze of more than five years amid intense lobbying by some top telcos.

The fresh plans to cut the rate could spark a price war should mobile phone operators opt to lower call tariffs for their customers.

A previous cut in the rate in 2010 from Sh 4.42 to Sh2.21 sparked a price war between Kenyan operators.

The CA said yesterday it had given an adequate window for the prevailing rate of Sh0.99 before changing it.

“Upon the expiry of the glide path in 2015, the authority decided to observe the market and see how the market reacts before proceeding to undertake another costing study,” said the regulator.

A smaller operator tends to pay more in mobile termination rates because its users are likely to spend more time on other networks than its own.

The lower termination rates, which could lead to lower calling, rates could benefit subscribers already grappling with reduced spending power due to the adverse effects of the coronavirus pandemic.

Mobile operators recently adjusted the cost of calls to other networks to reflect the recent change in excise taxes.

Airtel now charges Sh2.78 to make calls to other networks per minute while Safaricom and Telkom charge Sh4.87 per minute and Sh4.30 to call rival networks respectively.

The mobile termination rate was in 2012 cut to Sh1.44 per minute from Sh2.21 and subsequently to Sh0.99 in 2015.

Then President Mwai Kibaki had in 2011 stopped further cuts after operators said their business was under threat from sliding revenues.

Analysts said they expected operators like Telkom Kenya and Airtel to be the main beneficiaries from the plan, along with consumers.

Revenues for the larger operator Safaricom would likely fall but the impact would be more limited for its earnings.

The latest proposal is likely to be challenged by Safaricom.

The latest industry data from the CA shows mobile subscribers in the three months to December stood at 61.41 million in Kenya, indicating significant growth opportunities for mobile service providers.

Safaricom’s share of the voice market in December rose to the highest level in three years, cementing the telco’s dominance.

The CA data shows Safaricom’s share of the voice market grew to 69.2 percent in the three months to December from 64.7 percent in September.

The regulator attributed the rise to Safaricom’s calls and mobile data promotion offers.

Safaricom’s rising share of the voice market came as rivals Airtel and Telkom Kenya continued to lose grip.

“The increase is mainly attributed to Safaricom@20 Promotion that aimed at availing new subscribers of attractive voice and data bundle offers, while offering similar incentives to their existing customers,” the CA said in the report.

Airtel’s share of the voice market dropped to 28.5 percent in the period under review from 32.1 percent in September while Telkom Kenya’s share fell to 2.2 percent from three percent.

The last time Safaricom’s dominance of the voice market was higher than 69. 2 percent was in June 2018 when it stood at 70 percent.