Mobile price wars to ease as CCK cuts call termination rate

Communications Commission of Kenya Director-General Francis Wangusi. [PHOTO: FILE/STANDARD]

By Jevans Nyabiage

The telecoms industry regulator has slashed a key mobile calling tariff by 20 per cent, a sigh of relief for operators after a vicious three-year price war.

From Thursday, it will cost operators Sh1.15 a minute to terminate calls to other networks, down from Sh1.44 a minute. 

Communications Commission of Kenya Director-General Francis Wangusi said operators have already started to implement the reduction.

The Mobile Termination Rate (MTR), which mobile operators charge each other to terminate calls from another network, is expected to fall to Sh0.99 next year, according to a “glide path” developed by the regulator in 2010.

“From the returns we are getting from the operators, the third phase has commenced,” said Wangusi.

CCK’s decision to cut the rate comes as a huge relief for mobile phone operators who were hard hit by price wars that drastically lowered their profit margins.

But even as mobile operators go back to the drawing board to factor in this adjustment, consumers should not anticipate that the lower rate will translate into cheaper call charges.

“The rates are already low. Using Sh10 a day is like the calls are free,”  yuMobile Kenya Country Manager Madhur Taneja said, terming the move by the regulator to cut the rate further as “good for the industry”.

Airtel Kenya Managing Director Shivan Bhargava said the firm has implemented the new MTR and passed the savings onto its customers through new product offerings.

“Airtel recently launched new value bundles — Airtel Tosha — that give its customers up to 20 times more on voice calls, SMSes and data on a low daily subscription rate in anticipation of the glide path implementation,” he said.

When in CCK cut the rate by half to Sh2.21 in 2010, Airtel Kenya initiated a price war that saw calling rates fall by more than half.

But in the subsequent year when the rate was expected to fall to Sh1.44, then President Mwai Kibaki froze the implementation after lobbying from Safaricom and Telkom Kenya.

The two operators argued that any further price cuts were unsustainable and could hurt industry profitability. 

However, Airtel and yuMobile were of the opinion that a reduction of termination rates would allow consumers to enjoy more affordable calling rates, thus increasing penetration.

Generally, Airtel, yu and Orange feel they are paying Safaricom too much in call termination charges.

The smaller players gain the most when the interconnection rates are lowered.

Statistics

Statistics from CCK show that Safaricom accounted for 77.5 per cent of the industry voice traffic, meaning most calls are terminated by the operator.

For instance, in the three months to December last year, 5.37 billion minutes were spent on calls within the Safaricom network and 320 million minutes to other networks.

Airtel customers spent 391 million minutes on calls within the network, but spent 527 million minutes off-net.

yuMobile customers spent 474 million minutes within the network, and 157 million minutes off-net, while Telkom Kenya subscribers spent 52 million minutes on-net and 48 million minutes off-net.