CA decision to cut the mobile termination rate for the first time in six years is timely, coming right after the Treasury loaded higher excise on mobile airtime.
Other than adding to the cost of living, call charges are also a big cost line on businesses’ balance sheets.
The benefits to the economy associated with more affordable calls outweigh the extra billions these taxes raise for the exchequer in the long run.
The Communications Authority of Kenya’s (CA) decision to cut the mobile termination rate for the first time in six years is timely, coming right after the Treasury loaded higher excise on mobile airtime.
Kenyans will, naturally, expect this to translate into lower calling charges. Looking back at the last six years when the termination rate has remained unchanged, making calls has progressively become more expensive, with the higher taxes and protection of telco margins a big factor.
Airtel customers are today paying Sh2.78 to make calls to other networks per minute, while the charges for cross-network calls from Safaricom and Telkom are Sh4.87 and Sh4.30 respectively.
A few years back, these calls would cost anything between Sh1 and Sh3 at most, at a time when the smaller operators were aggressively hunting for subscribers.
Unfortunately, the increase in call charges goes unnoticed for many people who do not pause to calculate the number of minutes they are getting once they load their airtime.
Between excise duty and VAT, more than a third of loaded airtime is taken up as taxes. Other than adding to the cost of living, call charges are also a big cost line on businesses’ balance sheets. This is more so now that many businesses have cut back on face-to-face meetings due to the Covid pandemic.
This is why we laud the move by the CA to cut the interconnection rate, in the expectation that this will be passed on to the final consumer.
We call upon the Treasury to also appreciate the fact that imposing higher taxes on mobile charges is counterproductive. The benefits to the economy associated with more affordable calls outweigh the extra billions these taxes raise for the exchequer in the long run.
The telcos must also drop any opposition they might harbour to the new rate cut.
One of the reasons for the long wait for a review of the termination rate was an argument by the operators that their business was under threat from sliding revenues.
In our view, the local mobile market has now rapidly progressed towards maturity, and can therefore now accommodate lower rates.
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