- Safaricom has termed the move by CA to cut MTRs by 88 per cent as unprocedural.
- The company now wants the tribunal to issue orders retraining Communication Authority from implementing the cuts.
Communications Authority of Kenya director general Ezra Chiloba on Thursday defended the proposed low mobile termination rates, saying it will give small operators price flexibility.
He said flexibility will allow small operators to compete with Safaricom.
Chiloba argued that the proposed Sh0.12 new rate is sustainable and does not negatively impact industry players’ profitability.
“It is our position that due to its size, Safaricom enjoys economies of scale, and their costs are low compared to other small operators," he said.
"The proposed low termination rate will give small operators greater price flexibility to compete with them.”
The authority was responding to an appeal by Safaricom in which it seeks to set aside the reviewed Mobile Termination Rates and Fixed Termination Rates from Sh0.99 to Sh0.12.
Safaricom has filed the matter before the Communications and Multimedia Appeals Tribunal. It has termed the move by CA to cut MTRs by 88 per cent as unprocedural.
The company argued that CA ignored its own procedures and erred by using benchmarking methodology rather than the long-run incremental costing that has been used in previous reviews.
Safaricom now wants the tribunal to issue orders retraining CA from implementing the cuts.
But Chiloba said granting the order sought by Safaricom would mean giving undue preference to Safaricom’s preferred methodology of determining MTR and FTR, which would interfere with their discretion duly exercised in line with the law.
He said the choice of methodology in determining MTRs and FTRs is the prerogative of the regulator and cannot be dictated upon by a licenser or operator.
Chiloba said the regulation of interconnection rates is one of the tools used by telecommunications regulators to manage competition in the telecommunications industry.
“Safaricom has not demonstrated how, if at all, the revised MTR and FTRs hamper effective competition between persons engaged in commercial activities with the telecommunications industry," he said.
"There was no finding that the reduced MTRs and FTRs would hamper effective competition among the industry operators.”
According to the documents filed before the tribunal, CA had since 2019 been receiving requests from some mobile network operators to review the current termination rates, saying they were too high.
On account of the foregoing, CA undertook to carry out a review of the current MTRs and FTRs.
In February 2021, they developed the concept to review the current MTRs and FTRs using benchmarking methodology.
The decision on the methodology was informed by the prevailing macroeconomic and market conditions that posed challenges in carrying out and concluding a detailed network cost study in the short-term, including the prevailing Covid-19 pandemic.
The documents also said CA has, in the past, been requested by industry players, including Airtel Networks Ltd, to review MTRs to at least Sh0.15.
This is to enable small players to offer discounts as low as those offered by Safaricom, while still maintaining their profitability.
Airtel subsequently proposed an asymmetric interconnection rate where Safaricom would pay Airtel Networks Ltd Sh0.12, and Airtel would pay Sh0.06 in MTRs.
Chiloba said the proposed Sh0.12 is sustainable and does not negatively impact industry players’ profitability.
(edited by Amol Awuor)