Lower mobile phone calling rates put on ice after intense lobbying

Mobile phone users should not expect any further call price cuts for now.

This is after Safaricom and Telkom Kenya got backing from the country’s top offices — that of the President and of the Prime Minister to suspend implementation of new termination rates.

After intense lobbying from the pair, President Kibaki a week ago directed industry regulator Communications Commission of Kenya to suspend implementation of the mobile termination rates (MTRs) — the fee that operators levy calls to their networks from outside.

The directive that has since been ratified by CCK board required that rates be shelved pending a detailed evaluation of the economic impact of the current MTRs on the country’s economy.

Safaricom and Telkom Kenya had warned that a further cut would have a negative effect on the sector’s profitability, risk of job losses, curtail new capital investments, reduce government revenue and competitiveness.

The charges were expected to drop to Sh1.44 from the current Sh2.21 beginning next month, setting the stage for a new round of price wars.

Mass market model

This is a big blow to Airtel Kenya, which has been pushing for a further fall in the termination rates as its business strategy, just like that of Essar Telkom’s Yu depends on low-cost mass market model.

This sends the two back to the drawing board over sustainability of their model.

Airtel Kenya had backed the cut in cross-network charges while Safaricom and Telkom Kenya opposed it, sparking a vicious war in the industry that went to the Prime Minister’s office for mediation.

Mr Raila Odinga then formed a committee of industry experts to look into the matter. On Monday, the taskforce released a report that has come up with a raft of measures to help grow the industry.

Chaired by Mr Silvester Kasuku, Infrastructure expert at the PM’s office, the team recommends implementation of MTR be frozen until the review informs CCK on future outlook of the glide path with regard to mobile telephony industry.

“The freeze will give operators time to show stability and growth after recent reductions in the rates,” says the report, which Airtel Kenya disputes.

Airtel Kenya managing director Rene Meza said the decision to suspend the rates contravenes government sector policy because it will halt benefits to consumers and the industry in general.

“The recommendations are aimed at strengthening the ICT sector and enhancing its ability to contribute to the national development agenda,” said Mr Nzioka Waita, the director of corporate affairs at Safaricom.

“We are particularly pleased that the taskforce has recommended the downward review of spectrum pricing,” he said in a statement.