Safaricom to lose Sh2bn in call tariff cut


Safaricom PLC CEO Peter Ndegwa. FILE PHOTO | DIANA NGILA | NMG

Safaricom projects to lose Sh2 billion in the financial year ending March 2023 after the Communications Authority of Kenya (CA) cut mobile termination rates (MTR) by 41.4 percent.

MTRs are the charges levied by a mobile service provider on other operators for terminating their voice calls on its grid.

The rate was in August cut from Sh0.99 per minute to Sh0.58 per minute.

Now the telco, saw a Sh470 million drop in interconnect revenue during the half-year that ended September when the new rates applied for two months, expects the impact in the financial year to be Sh2 billion.

“Interconnect revenue has declined coming from the MTR impact that we have seen in the first two months of the year,” said Peter Ndegwa, CEO at Safaricom in a call with investors and analysts on November 11.

“The full-year impact of MTR this year, just on a direct basis, which is the interconnect revenue drop, is around Sh2 billion.”

Safaricom is the major beneficiary of the MTRs due to its leading market share in the voice business, with the telco recording a net gain from its rivals Airtel Kenya, Telkom Kenya, and Equitel.

The projected Sh2 billion drop in eight months means the telco translates to an average of Sh250 million per month, setting it up for about Sh3 billion hit as the full-year impact in the financial year ending March 2024.

The telco’s lost revenue will be its rivals’ gain since they are going to save on what they have been paying to the Nairobi Securities Exchange-listed firm.

Reduced MTR has added headwinds to the voice revenue, which is already on the decline alongside text messaging revenue that is facing pressure as mobile data usage grows and customers turn to Voice over Internet Protocol (VoIP) services.

VoIP platforms enable calls through the Internet and include WhatsApp, Skype, Zoom and Facebook Messenger.

Downward pricing

MTR has been on a decline, coming from Sh2.21 per minute in 2010 to Sh1.44 in 2011 and Sh1.15 in 2012.

This was followed by a further cut to Sh0.99 in 2013 before last year’s review.

The cut in termination rates is yet to trigger any downward pricing among the telcos, which could have piled more pressure on voice revenues.

Safaricom’s earnings from MTR charges were to fall by a much steeper margin based on the earlier move by CA to cut MTR to Sh0.12 per minute.

But Safaricom challenged CA’s move at the Communications and Multimedia Appeals Tribunal, which was due to determine the matter before the parties reached a middle ground and filed consent.

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