Safaricom faces a significant drop in its interconnection revenues after the telecommunications sector regulator moved to steadily cut what operators charge each other to enable cross-network voice services by a cumulative 26.8 percent in four years.
The Communications Authority of Kenya (CA) has set a four-year glide path that will see the Mobile Termination Rate (MTR) per minute decline from the previous Sh0.41 to Sh0.37 that took effect on Sunday and further to Sh0.3 by March 2029.
When a customer on one network calls a user on another, the originating operator pays the termination fee to the receiving network.
For example, Airtel Kenya will charge Safaricom a fee when a call is placed to its network from a Safaricom line.
Safaricom is the net beneficiary of MTR, owing its leading market share of 61 percent, meaning that a reduction in the interconnect fee will reduce the amount it collects from its rivals.
Under the new schedule, rates will drop to Sh0.37 per minute in the first year ending February 2027, Sh0.35 in the year ending February 2028, Sh0.33 in a similar period to February 2029, and finally to Sh0.30 effective March 2029 before another review is done.
This is expected to hit Safaricom, which is the net earner from MTR fees in the country. Interconnection revenues contribute to about one percent of the telco’s total revenues, more than roaming.
In the year to March 2025, Safaricom earned Sh4.7 billion from interconnection charges, paid by rivals Airtel and Telkom Kenya for calls placed from their networks. It was, however, a drop from the Sh5 billion it earned the previous year.
Its expenses on interconnection, which it discloses together with roaming costs or fees paid on calls from foreign countries, also dropped from Sh7.3 billion to Sh6.5 billion. Airtel and Telkom do not disclose their interconnection revenues and costs.
The drops came after the regulator reduced the MTR from Sh0.58 to Sh0.41 per minute, the largest single reduction in over a decade, highlighting the impact on revenues the new cut will have on the telco.
Perfect competition
The latest cut comes after the pressure from the World Bank, which said the MTR was not conducive for perfect competition in the telecommunications market, which it flagged as one of the industries that was uncompetitive, to the detriment of the consumers.
“Kenya has yet to fully implement cost-oriented and pro-competitive mobile termination rates. These create club effects that favour larger operators, because networks with fewer customers must pay MTR on a higher share of calls their customers make,” World Bank said last December.
This is now the fifth time that the regulator has reviewed MTRs in a series of cuts meant to improve competition in the market and favour the smaller players which are mostly burdened by the charges.
The first review was in 2007, then 2010, and the third in 2021, and then the last was in 2024. The regulator had sought to cut rates down to Sh0.12 per minute but faced fierce opposition from Safaricom, forcing it to resort to phased reductions.
Follow our WhatsApp channel for the latest business and markets updates.
