State slashes mobile termination rates by 28 per cent
Communications Commission of Kenya offices in Nairobi. The rate mobile operators pay each other for calls originating from rival network will be cut by 38 per cent to Sh1.60 a minute from July Photo/File
The rate mobile operators pay each other for calls originating from rival network will be cut by 27.6 per cent to Sh1.60 a minute from July — ending the one year freeze and reducing the cost burden on the smaller operators.
The agreement was arrived at a meeting called by the Ministry of Information, the Communications Commission of Kenya (CCK) and the four mobile operators, Safaricom, Airtel —Telkom Kenya and Essar’s Yu.
The Mobile Termination Rate of (MTR) of Sh1.60—which is lower than the current rate of Sh2.21-- was arrived at as a compromise fee because Safaricom was calling for a high fee while the CCK and the other three operators were keen on Sh1.44.
“We had a meeting today with all the operators and agreed that the mobile termination rates would be lowered to Sh1.60 beginning July and that CCK conducts a fresh study that will determine the rates to be applied from 2014 onwards,” Information Permanent Secretary Bitange Ndemo told the Business Daily in an interview Tuesday.
Safaricom also added a fresh twist when it maintained that the rate has not been approved by the CCK board.
“I’m not aware that the board of the CCK has yet approved any changes to the MTR,” said Bob Collymore, the CEO of Safaricom in an email interview.
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 telecommunication firms have ruled out lower tariffs on the lower termination rates and will instead absorb the cost savings.
This signals the end era of cheap calls that Kenyans have settled to in the past two and half years.
Lower tariffs
The CCK said that Safaricom 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).
“Artificially low termination rates do not allow operators to fully recover the cost of receiving and terminating calls received from other networks and this significantly impacts the network receiving the largest number of cross-network calls such as Safaricom,” Safaricom argued.
Safaricom remains dominant with 67.7 per cent of Kenya’s mobile phone subscribers.
Airtel has 15.7 per cent, Orange 10.4 per cent while Yu trails with 6.2 per cent.
Uganda charges a termination rate equivalent to Kenya’s Sh4.50 a minute while Tanzania’s rates are at Sh5.75.
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