Safaricom at the receiving end of Kenya’s telecom regulator’s ‘sledge hammer’
Last month, Kenya’s leading telecom operator, Safaricom, filed a petition against the Communications Authority of Kenya (CA) following the regulator’s decision to slash the mobile termination rates (MTR) charge in the country to Sh0.12 ($0.0011) per minute.
Business Insider Africa reported that Safaricom disliked the move. And that’s because cutting the MTR rate resulted in the company earning less income through MTR charges.
Well, the telecom regulator has now responded to the petition which was filed before the Communications and Multimedia Appeals Tribunal. According to reports by local media, CA said it could further cut mobile termination rates in the near future, following the conclusion of a detailed network cost study it plans to carry out.
The telecom regulator argued that it is its prerogative to decide which methodology to adopt when fixing MTR rates.
In a statement filed with the tribunal, CA’s Director-General Ezra Chiloba was quoted to have said that no operator has the right to dictate how its regulatory functions should be carried out.
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The statement further explained that the Sh0.12 ($0.0011) MTR charge reduction is only intended as a temporary measure pending the time the detailed network cost study is concluded.
“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 was quoted to have said.
Do note that mobile termination rates make up a component of the costs associated with mobile telephony. Telecom service providers levy fees on each other every single time their customers terminate calls. And ultimately, how much a network provider either earns from or pays for mobile termination rates per annum depends on the size of its customer base.
Safaricom has the largest voice market in Kenya at 68.9%. Therefore, while it earns an estimated Sh6.5 billion (about $53 million) annually from MRT charges to other telcos, it only pays its competitors the sum of Sh2.6 billion (about $26 million) for the same.
“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,” Chiloba explained.
Meanwhile, Safaricom’s competitors are glad that something is finally being done about the interconnect rate. As a matter of fact, Airtel Kenya Networks had scolded Safaricom for suing the Communications Authority of Kenya following the MTR charge cut in December.
Safaricom’s competitors (Airtel Kenya and Telkom) pay more for the interconnect charges and earn less. Therefore, the pricing review by CA would help reduce how much Airtel and Telkom Kenya pay to Safaricom, thus reducing how much money the dominant telco gets from mobile termination rates fees.
