Airtel Kenya managing director Shivan Bhargava said that the firm would reconsider its local investments over freeze on mobile termination rate cut. Photo/FILE
What you need to know:
Airtel reckons that the government interference with CCK is hurting its investments.
The level of MTR affects the operators’ costs and influences pricing of tariffs.
Telecoms operators are deeply divided over the possible impact of fresh MTR cut on the profitability of the industry and ultimately the overall sustainability of the sector.
Airtel Kenya says the delay in lowering the Mobile Termination Rate (MTR) is a government ploy to benefit two of its rivals and warned that it may be forced to review some planned investments.
The Communications Commission of Kenya (CCK) was expected to cut the MTR, the fee which mobile firms charge one another for calls terminating into their systems from rival networks, to either Sh1.44 a minute or Sh1.60 from current Sh2.21 last Thursday.
The move was delayed after CCK’s board feared upsetting State House, which had issued a directive in August that the cut should not be implemented before a new study on the issue is conducted.
Airtel reckons that the government interference with CCK is hurting its investments.
“The apparent interference in the implementation of industry policy, and instances where the policy is implemented in favour of certain operators is impacting negatively on our company’s ability to deliver on its commitments to consumers and shareholders,” said Airtel Kenya managing director Shivan Bhargava at a press briefing Wednesday.
The level of MTR affects the operators’ costs and influences pricing of tariffs.
Telecoms operators are deeply divided over the possible impact of fresh MTR cut on the profitability of the industry and ultimately the overall sustainability of the sector.
The fee has divided the telecoms down the middle pitting Safaricom, the largest player with more than 20 million subscribers on its network and Telkom Orange, against the two Indian firms Airtel and Essar, which operates under the yu brand.
Safaricom and Telkom have argued that a further cut in the MTR will render the industry unprofitable making it impossible to invest in the networks, a development that will ultimately harm the consumer.
Their opponents reckon that the status quo will benefit Safaricom and hurt the 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.
The government owns 35 per cent of Safaricom and 49 per cent of Telkom Kenya and analyst said that Bhargava was referring to the two firms.
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 Kibaki froze it for a year following intense lobbying by Safaricom and Orange.
“We have made all our decisions to enter this market and make significant investment on the…the government promise that the MTR glide path as professionally determined, would be fully implemented,” said Mr Bhargava.
Analysts led by Morgan Stanley said that Safaricom would be the biggest beneficiary from the delay in the MTR cut.
A draft report Kenya Institute of Public Policy Research and Analysis, the State think-tank, indicate that the economy had gained from the lower tariffs, and that the lower MTR has had a positive effect on revenues of the four telecom operators.
