CCK delays call rate cuts ‘to avoid clash with Kibaki’
File | Nation The Communications Commission of Kenya (CCK) headquarters. The reduction in the rate mobile phone operators pay for calls from rival networks has been delayed to the end of October to avoid a confrontation with State House.
What you need to know:
The research firm’s draft report seen by the Business Daily indicated that lower tariffs have had a positive effect on revenues of the four telecom operators, their traffic, subscriber numbers as well as mobile penetration.
The downward review in of MTR 2010 from Sh4.42 to Sh2.21 gave the operators room to cut tariffs by more than half, but the telcos have ruled out lower call rates should the rate fall further and will instead absorb the cost savings to boost earnings that had been hit by price wars.
The reduction in the rate mobile phone operators pay for calls from rival networks has been delayed to the end of October to avoid a confrontation with State House.
The Communications Commission of Kenya (CCK) was expected to announce a drop in the Mobile Termination Rate (MTR) from the current Sh2.21 to either Sh1.44 (as the regulator had initially planned) or Sh1.60 (as agreed on by all operators in May).
(Read: CCK defies Kibaki on mobile tariff cut) The decision was expected to be delivered after CCK’s Thursday’s board meeting, but was delayed to October avoid upsetting the government which appointed nine of the regulator’s non-executive directors, according to people familiar with the board proceedings.
“We shelved the decision to avoid a confrontation with State House since it appeared we were slighting the Presidency,” said one of the CCK Board members, who sought anonymity given the sensitivity of the matter.
“The management was basing its decision on a draft report from Kippra. It was also felt that announcing the rates before the study is concluded could have exposed us to legal actions.”
Mr Kibaki’s private secretary, Nick Wanjohi, who claims to have acted on the president’s instructions, had directed CCK not to make any further cuts in the MTR until another study of its impact is done and the outcome presented to the President.
This prompted the communications regulator to tap the Kenya Institute of Public Policy Research and Analysis (Kippra), the State think-tank, to conduct a study on the impact of lower tariffs on the economy and mobile operators.
The research firm’s draft report seen by the Business Daily indicated that lower tariffs have had a positive effect on revenues of the four telecom operators, their traffic, subscriber numbers as well as mobile penetration. Kippra presented the draft report on September 20 and promised to submit the final copy on Thursday.
Tax grown
The report also shows that total tax contribution from the mobile operators had grown steadily in the past five years, a pointer that the economy has not been negatively affected by lower termination rates.
This emboldened CCK’s management to make a case for lower rates at Friday’s board session, but few of the board members were willing to support an immediate fall in the rates while agreeing that MTR is due for review.
“The board will review the rates towards the end of October,” said Mr Francis Wangusi without giving details on the boardroom proceedings.
The CCK board is chaired by Ben Gituku, who was appointed on September 14 by Mr Kibaki to replace Philip Okundi, who is making a return to elective politics.
Besides Gituku and director-general Francis Wangusi, other board members are Joseph Kinyua (PS, Treasury), Bitange Ndemo (PS, Information), John Omo (the company secretary) and Mutea Iringo (PS, Internal Security). It also has five other directors tapped from the private sector by the information minister.
Lawyer Paul Muite said that it was going to be difficult for the board to act against the president’s directive, which has been termed unconstitutional.
“Because he appoints the commissioners, the president may see their independence as only illusory,” said Mr Muite. ‘’The regulator said, in a board paper seen by the Business Daily, that Mr Kibaki’s letter was in breach of Article 135 of the Constitution which stipulates the form and substance of official presidential directives.
The Constitution states that “a decision of the president in the performance of any function of the president under the Constitution shall be in writing and shall bear the seal and the signature of the president.”
The downward review in of MTR 2010 from Sh4.42 to Sh2.21 gave the operators room to cut tariffs by more than half, but the telcos have ruled out lower call rates should the rate fall further and will instead absorb the cost savings to boost earnings that had been hit by price wars.
Safaricom has been against low termination rate and analysts led by Morgan Stanley said that the company would be the biggest beneficiary from the delay in the MTR cut.
