Kenya delays lower termination rates

GOVERNMENT

By Semaj Itosno, Nairobi, Kenya

Kenya’s mobile subscribers will have to wait a little longer before enjoying reduced calling rates.

The reduction in the rate mobile phone operators pay each other for calls originating from rival networks has been delayed on failure by the board of Communication Commission of Kenya (CCK) to approve the new charges as expected.

This is despite the mobile phone operators, CCK  and Kenya’s Ministry of Information having agreed in May to cut the Mobile Termination Rate  (MTR) rate to Sh1.60 (USD 0.02) a minute on Sunday from the current Ksh2.20 (USD 0.03) — in what was to end the one-year freeze and reduce the cost burden on smaller operators.

This means Kenya remains at par with Uganda but Tanzania still charges higher.

Uganda charges a termination rate equivalent to Kenya’s Ksh4.50 (USD 0.05) a minute while Tanzania’s rates are at Ksh5.75. (USD 0.07)

Essar said the delay would hurt the smaller operators. “yuMobile is disappointed by the delayed implementation of the reduced MTR,” said Madhur Taneja, Essar’s country manager.

Safaricom has been the only operator that has benefited for the current termination rate. The CCK said that Safaricom earned Sh868.9 million from the rate in the three months to December while its main rival Airtel paid out Ksh544.2 million (USD 6.56million), Essar Ksh192.5 million (USD 2.32million) and Telkom Kenya Ksh21.3 million (USD 0.26million).

Safaricom remains dominant with 67.7% of Kenya’s mobile phone subscribers. Airtel has 15.7%, Orange 10.4% while Yu trails with 6.2%. 

Safaricom, which has been against low termination rates, said there was no alarm.  “There is no emergency as far as we (Safaricom) are concerned, the CCK Board will consider the matter in due course together with representations made by all stakeholders and advise the industry accordingly,” Nzioka Waita, director corporate affairs at Safaricom.  “We would expect any decision made by the CCK to be backdated to July 1, 2012.”

“It is inevitable that the delayed implementation will only benefit the dominant player and will lead to reduced revenues for other players as they continue to pay the higher rates. This is a big blow to the industry and the younger players like yuMobile who have pushed for a level playing field.”

 Francis Wangusi, the acting director general of CCK, said the new rates have been delayed after the regulator failed to approve them last week.

Wangusiu said he board did not divulge reasons for the delay.

The MTR of Sh1.60 (USD 0.02)  was arrived at as a compromise fee given that Safaricom was calling for a high fee while the CCK and the other three operators—Airtel, Telkom Kenya and Essar’s Yu—were keen on Sh1.44. (USD 0.017)

The rate fell from Ksh4.42 (USD  0.053) in June 2009 to Ksh2.21 (0.027) in July 2010 and was to drop to Sh1.44 last June before President Mwai Kibaki froze it for one year following intense lobbying from Safaricom and Orange.

The downward review in 2010 gave the operators room to cut their tariffs by more than half, but the telecommunication firms have ruled out lower call rates following the reviewed termination rates and will instead absorb the cost savings.