An Airtel employee at a Nairobi outlet. The firm has ruled out reducing its calling rates. File
Airtel Kenya will not cut its tariffs in line with planned reduction in the mobile termination rates (MTR) in July, signalling the end of the low calling rates that Kenyans have enjoyed since 2010.
The Communications Commission of Kenya (CCK) said on Monday that termination rate — the amount of money an operator pays rivals if its subscribers call another network — would drop to Sh1.44 a minute from the current Sh2.21.
This, like in 2010 when the rate fell from Sh4.42 in June 2009 to Sh2.21 in July 2010, was expected to give operators room to cut the calling rates and wage a price war in a bid to grow market share. Airtel says it will use the savings — which will come from paying less to its rivals for handling its calls — to upgrade its network.
“We are fully behind CCK move to continue with the MTR glide path but will not lower our tariffs at this moment as we will use the cost savings to upgrade our network,” Airtel Kenya managing director Shivan Bhargava said Thursday.
In 2010, Airtel took advantage of the lower termination rates to halve its tariffs in what sparked a price war as other operators led by Safaricom followed suit, which saw Kenya emerge with cheapest calling rates in Africa. The moved slashed the industry’s earnings and saw Safaricom report a drop in profit as its rivals like Telkom Kenya sunk deeper into losses.
This has seen the operators re-think their strategies with budget operators like Bharti Airtel — which posted its ninth straight quarterly profit decline on Wednesday — raise tariffs at the global level to boost profits and cash flow.
Now, the operators led by Airtel and Telkom Kenya are keen to reduce the amount they pay Safaricom for handling their calls in what is set to disappoint CCK whose intention was to spur competition with reduction of the termination rate.
“We introduced the MTR to enhance competition. There are some operators who fear competition and do not want us to continue with the current glide path and that is the reason they are asking for another study,” said CCK acting MD Francis Wangusi.
The termination rate was to drop to Sh1.44 last June before President Kibaki froze it for one year following intense lobbying by Safaricom and Orange.
Safaricom said that the current rates are based on an outdated model and asked CCK to conduct a fresh study.
