•The new rates were to be effected from January 1.
•Safaricom however challenged it through the Communications and Multimedia Appeals Tribunal which stayed the implementation pending hearing and determination.
Safaricom is reaping from its network investment and product innovation, ICT CS Joe Mucheru has said, defending the telco on dominance accusations by its competitors.
He however supported the proposed cut in Mobile Termination Rates (MTR) saying it will make the market competitive and attract new players into the country’s telecommunication sector.
The Communications Authority of Kenya has proposed to cut MTR to Sh0.12 from Sh0.99, saying it will benefit consumers and ensure business continuity for network providers.
MTR is the price that a mobile telephone operator charges another mobile operator for terminating its off-net calls on its network and its reduction is expected to give small operators price flexibility.
According to CA, termination rates are not meant to be income-generating streams but cost recovery mechanisms.
An analysis by the authority notes that due to the current imbalance in off-net traffic volumes, in a quarter, about Sh1.005billion is paid out among operators as interconnection fees.
“The net beneficiary is Safaricom PLC that received Sh883 million while the net losers are Airtel Kenya and Telkom Kenya that payout Sh845,000 and Sh115,000 respectively,” Mucheru said.
He was before the Senate committee on Information and Technology, chaired by nominated Senator Abshiro Halake, to clarify on the tariffs reduction and competition in the country’s telco space.
“Safaricom is a big player and almost every new customer coming into the market goes for its services. Other players also rely on its network. However, the termination rate reduction will ease the costs and make the sector competitive. It will also attract new players,” Mucheru said.
According to the ministry, the revision will reduce the net pay-outs by 87.9 per cent.
“The reviewed rate of Sh 0.12 is reflective of the current costs of interconnection and that the licensees have enjoyed artificially high prices for over five years thus there was no need for a glide path,” The CS said.
The Competition Authority of Kenya’s analysis on the impact on industry players was based on their revenues, levels of profitability, and sustainability.
According to the competition watchdog, lower voice termination rates would facilitate greater retail price flexibility, which should facilitate a reduction in overall price levels for mobile services to the benefit of consumers.
Small players had requested a review of the current MTRs to at least Sh0.15 to enable them offer discounts as low as those offered by Safaricom, whilst still maintaining their profitability.
Airtel has proposed an asymmetric interconnection rate where Safaricom would pay smaller players Sh0.12 and the smaller players would pay Safaricom Sh0.06. The new rates were to be effected from January 1.
Safaricom however challenged it through the Communications and Multimedia Appeals Tribunal (CAMAT), which stayed the implementation through in a December 24 ruling pending hearing and determination of the matter.
In the appeal, Safaricom argued that CA erred in law and fact by applying the benchmarking method as opposed to Network Cost Study.
It further stated that the authority breached the constitutional requirements on public participation and fair administrative action.
Telkom Kenya, Airtel, and the Consumer Federation of Kenya (COFEK) have joined the appeal in support of the reduction, arguing that it will lead to fair competition and enhance consumer benefits from competitive prices.
The parties are expected to highlight their submissions on April 20.
Safaricom accounted for the lion share, by far, of the active mobile subscriptions which stood at 64.9 million as at September 30, 2021.
It also enjoys the highest market shares in mobile money, mobile data and mobile broadband subscriptions.
Senator Halake called for better service provision by operators to the public, increased reach and affordable products.