Cofek says in submissions filed before the Communication and Multimedia Appeals Tribunal that lower mobile termination rates do not automatically result in losses for Safaricom.
The CA moved to cut the charge to Sh0.12 per minute from the current Sh0.99 per minute after a six-year freeze and the capping was to start on January 1.
Safaricom argues that the regulator ignored the true cost of doing business and relied on little-known benchmarks.
The Consumer Federation of Kenya (Cofek) has supported the reduction of call rates, saying the move by Communications Authority (CA) was justified and will benefit general public and users of telecommunication services.
Cofek says in submissions filed before the Communication and Multimedia Appeals Tribunal that lower mobile termination rates do not automatically result in losses for Safaricom as alleged by the telco, especially when it is not compared against the guaranteed higher volume of scale of cheaper calls.
The CA moved to cut the charge to Sh0.12 per minute from the current Sh0.99 per minute after a six-year freeze and the capping was to start on January 1 but it was suspended by the tribunal following Safaricom’s appeal.
Safaricom argues that the regulator ignored the true cost of doing business and relied on little-known benchmarks.
“The appellant is neither justified nor has the moral authority to oppose reduced mobile termination rate charges reduction, which is long overdue as per the initial glide-path announced by the respondent (CA),” Cofek secretary-general Stephen Mutoro said in an affidavit.
The hearing was adjourned to May 30 when parties will resume highlighting of submissions.
Cofek has joined Airtel, Telkom Kenya and CA in opposing Safaricom’s bid to overturn the reduction.
Safaricom earns an estimated Sh6.5 billion annually from MTR while paying out Sh2.6 billion to rivals, leaving it in a profitable position while competitors remain in a net losing trade.
Mr Mutoro said in court documents that during the peak of the Covid-19 pandemic, Safaricom lowered or suspended some of its charges for several months but still made profits.
The telco’s net profit for the financial year ended March 2021 dropped by 6.8 percent to Sh68.67 billion from Sh73.65 billion the previous year, a fall attributed to the Covid-19 pandemic.
The decline of revenue includes M-Pesa revenues after transfers of Sh1,000 was zero-rated and profits declined by 2.1 percent or Sh1.79 billion from mid-March to December 2020.
Cofek said in the appeal that it will not be in the interest of the public to reverse CA’s decision. “The appellant has yet to demonstrate that t’s margins will be adversely affected if the decision of the respondent is allowed, as it ought to be,” he said.
In its submissions, the regulator said the revised rates will give small operators greater price flexibility to compete with the market leader- Safaricom and benefit consumers.
“It is our position that due to its size, Safaricom enjoys economies of scale, and their costs are low compared to other small operators. The proposed low termination rate will give small operators greater price flexibility to compete with them,” CA director-general Ezra Chiloba said.
Safaricom, however, says any reduction in MTRs often leads to a restriction in the rollout of the networks as operators could argue that there is a reduced incentive to expand their networks.
