The implementation of the new rates at which mobile operators pay each other for calls originating from rival network has run into hurdles after operators emerged with fresh demands, sending the government back to the drawing board.
The operators had on May 29 struck a deal that was to see the mobile termination rate fall to Sh1.60 a minute on July 1 from the current Sh2.21 in what was to end the one-year freeze and cut the cost burden on the smaller operators.
On Tuesday, it emerged that the operators were divided on the way forward with Airtel said to demand a lower rate of Sh1.44 while Telkom Kenya is comfortable with the Sh1.60 but on condition that regulator caps minimum calling rate at Sh4 a minute.
“Some of the operators reneged on the Sh1.60 mobile termination rate (MTR) agreed earlier and instead have come up with other demands, which have made it difficult for CCK (Communications Commission of Kenya) to move forward on this issue,” said a director at CCK who requested anonymity given the sensitivity of the matter.
Information PS Bitange Ndemo confirmed the split, but refused to give details.
“CCK should be left alone to do its work independently and because interfering with its work will only weaken the regulator,” urged Dr Ndemo.
He said the date for the implementation of the new rates is now unknown and the smaller operators like Essar reckon that the status quo will benefit Safaricom and hurt the meagre earnings of the smaller operators whose significant share of calls head to Safaricom, which remains dominant with 65.3 per cent of Kenya’s mobile phone subscribers.
Airtel has 15.3 per cent, Orange 10.6 per cent while yu trails with 8.7 per cent.
Safaricom has been the only operator that has benefited for the current termination rate.
The CCK said that the operator earned Sh868.9 million from the rate in the three months to December while its main rival Airtel paid out Sh544.2 million, Essar (Sh192.5 million) and Telkom Kenya (Sh21.3 million).
In the three months to June, Airtel subscribers made half of their calls amounting to 897 million minutes to rival networks while Safaricom’s made 4.5 per cent of the 5.2 billion minutes to rivals. Telkom Kenya’s subscribers made 64.5 per cent of their calls amounting to 55.5 million minutes.
“I think CCK must regulate the retail prices to make the sector more profitable, leading to a better building of values and creation of jobs,” Telkom Kenya CEO Mickael Ghossein told the Business Daily in an interview.
“As Telkom Kenya, we are looking to have anti-dumping (avoid selling under the running cost) mechanisms to stop the destruction of the telecom sector and its value. We have been pushing for this since the Q4 2010.”
The MTR of Sh1.60 was arrived at as a compromise fee given that Safaricom was calling for a higher fee while the CCK and the other three operators were keen on Sh1.44.
The rate fell from Sh4.42 in June 2009 to Sh2.21 in July 2010 and was to drop to Sh1.44 last June before President Mwai Kibaki froze it for one year following intense lobbying from Safaricom and Orange.
The downward review in 2010 gave the operators room to cut their tariffs by more than half, but the telecos have ruled out lower call rates and will instead absorb the cost savings.
Safaricom, which has been against low termination rates, recently said there was no alarm over the delay in having new MTR.
This comes as global financial services firm Morgan Stanley, in a research note published this month said that Safaricom would be the biggest beneficiary from the delay in the MTR cut, adding that the freeze would discourage more aggressive tariff reductions from Airtel and Yu.
“It is unclear if a Sh1.60 MTR rate (from Sh2.21) will still be implemented. Any delay would add about five per cent earnings before interest and tax and reduce the competitive threat of tariff reduction,” said the financial services firm in the research note. [email protected], [email protected]
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