Tariff wars cause major drop in mobile phone airtime sales

Mr Kholi also indicated that Bharti would consider entering the TV market that in his view remains hugely unexploited.

The price wars began in earnest three weeks ago after the Communications Commission of Kenya (CCK) announced new interconnection rates leaving the operators with enough headroom to lower voice tariffs.

The commission has imposed a mandatory 50 per cent reduction in mobile termination rates from Sh4.42 per minute to Sh2.21 per minute.

This will progressively decline by 35 per cent, 20 per cent and 15 per cent annually in 2011, 2012 and 2013 respectively before attainment of fully cost-oriented operations in 2014.

Rate cuts

The rate cuts have piled heavy pressure on voice, which accounts for up to 80 per cent of some mobile operators’ revenues, taking the players back to the drawing board.

Increased regulation remains a significant consideration for mobile firms in coming months but the market regulator believes it is in the interest of the entire market.

“Improvement of the competitive landscape arising from these interventions will generate significant market efficiency dividends for the entire industry, said Charles Njoroge, Director-General of CCK.

Apart from the threat of a new a set of regulations aimed at curbing dominance in the sector, operators will also have to contend with weakened subscriber bases following the conclusion of the recent SIM registration effort.

The CCK’s announcement that the country will introduce mobile number portability (MNP) by December 2010, also presents a new problem as it will enable subscribers to change their service provider without losing their mobile number.