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Why telcos struck out-of-court deal on mobile calls connection charges

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Airtel money and Safaricom M-PESA shops adjacent to each other on Banda Street, January 10, 2012. FILE PHOTO | NMG

Safaricom, Airtel, and Telkom Kenya opted for an out-of-court settlement on the charges for interconnecting mobile calls to end what they anticipated could have been a drawn-out legal battle.

The settlement of the dispute, principally between Safaricom and the Communications Authority of Kenya (CA), could see consumers benefit from lower calling rates should the players cut their prices in response to the reduced tariff.

The telcos last week struck a truce and lowered mobile termination rates (MTRs) to Sh0.58 per minute from Sh0.99 effective August 1. The regulator had wanted to cut the rate to Sh0.12 per minute at the start of the year but Safaricom blocked the directive at the Communications and Multimedia Appeals Tribunal.

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Safaricom had argued that the CA’s directive should have been based on a cost study rather than a benchmarking methodology that was used.

The telco's rivals joined the case as interested parties in support of CA but the matter was withdrawn ahead of a decision, which was expected last Friday.

“In the interest of time and to avoid a protracted court process that would rob consumers of the imminent benefits of reduced MTRs and FTRs, Telkom and the other parties agreed to settle the matter out of court,” says Telkom Kenya.

The company, the third biggest player in the voice market disclosed that the settlement was meant to speed up lowering the cost of calls and offer consumers more options.

While telcos are not obligated to reduce their call tariffs in line with the reduction of MTRs, the new rates that took effect last week are likely to trigger offers on call tariffs, making consumers the ultimate winners.

Higher MTRs mean higher calling rates, prompting the review of the fees with the desired impact of lowering the cost of mobile phone calls.

The truce ended seven months of court battles that had denied consumers the benefit of reduced MTRs.

Telkom Kenya said it was keen on offering lower calling rates in the wake of the deal.

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“Telkom welcomes this consent judgment as it will have positive outcomes for the customer. Today’s customer demands more competitive and comprehensive products that address their different and ever-changing needs,” said Telkom in a statement.

“We will continue to develop new and competitively priced products and solutions such as Madaraka Life and the Changa Bundle in response to these customer dynamics and remain positive that there will be a further downward review of the MTRs and FTRs (fixed termination rates) resulting in even more benefit to the customer.”

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