Safaricom Oppose Regulator’s Mobile Termination Rates

Safaricom, Kenya’s biggest telecoms operator, has opposed the market regulator’s review of mobile termination rates and fixed termination rates that would lead to affordability in internetwork calls.

The Communications Authority (CA) capped Mobile Termination Rates (MTRs) that local mobile phone operators charge each other for interconnecting customers by KSh0.87 from KSh0.99 to KSh0.12.

“The review was founded on the recognition that higher MTRs mean higher calling rates for consumers,” CA director-general Ezra Chiloba said through a press statement.

“At the retail level, consumers will now enjoy access to a variety of affordable services across networks and at the wholesale level, operators will have more price flexibility when developing innovative and affordable products.”

The review was last done in 2012 when it was reduced to KSh1.44 per minute from KSh2.21 and subsequently to KSh0.99 in 2015.

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Interconnection involves the physical and logical linking of telecommunication networks to allow customers of one service provider to communicate with customers of another service provider.

This implies that, in order for customers of one operator to communicate with the customer of another operator, the systems of the two operators must be interconnected for the traffic to flow through.

Naturally, all network operators are monopolies in their own networks in so far as interconnect is concerned, since the other operators’ customers can only reach their customers through their network.

Subsequently, interconnect is an essential component in telecommunications and its pricing and access framework can be used as a barrier to entry and expansion, thereby impeding competition. Moreover, high interconnect prices have a correlation with high retail tariffs, which ultimately reduce consumer welfare.

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Unlike Telkom Kenya and Airtel Kenya who welcomed the directive which would be effective January 2022, Safaricom has filed a case with the Communications and Multi-media Appeals Tribunal opposing it.

According to Safaricom, the regulator should have adopted a cost modelling approach as opposed to international benchmarking to determine termination rates. The telco wants the matter certified as urgent.

“The applicant stands to suffer substantial and irreparable loss unless this application is heard, and a stay of the decision is granted as a matter of urgency,” the suit says.

Consequently, Safaricom wants the tribunal to issue an injunction restraining CA from implementing the cuts until the appeal is heard and determined. 

Safaricom argues that the regulator ignored public participation, adding that it was not given an opportunity to be heard and make representations before the final decision was arrived at.

“The respondent (CA) adopted a procedure that was unreasonable and procedurally unfair in arriving at the impugned decision contrary to Article 47 of the Constitution as well as section 4 of the Fair Administrative Action Act, 2015,” Safaricom says in its appeal.

Airtel Kenya in an emailed statement said the reduction will increase mobile penetration in Kenya supporting the Government’s broadband s” We believe that any attempt to delay or scuttle the implementation of the MTR will deny consumers the benefits of more affordable calling prices.”

”This benefit to consumers needs to be protected considering that high Mobile Termination Rates are not meant to be a revenue source for Mobile or Fixed voice service providers but an enabler for seamless calling which improves consumer access to communication.” it added.

Telkom Kenya on the other termed the review as timely and a progressive step towards making voice services more affordable and accessible to Kenyans.

“Globally, big and dominant players or incumbents in mobile telephony markets have had a pricing advantage due to the imbalance of connecting traffic between themselves and other network operators. Higher MTRs and FTRs also have the potential to negatively impact the consumer if these larger operators are to price discriminate between on-net and off-net calls,” Mugo Kibati, CEO Telkom Kenya said. 

“This could lead to the creation of a “club effect” where customers of the larger operators are offered attractive price incentives (that are not affected by the MTRs and FTRs) to stay on the network. Consequently, “new” customers could also feel compelled to join the larger operator’s network, which has a higher number of subscribers, to keep their voice call costs low, due to lower on-net rates compared to the high off-net pricing were they to join an alternative network. This would in the end stifle competition and deny customers of choice.”