Safaricom oppose CA’s new interconnection rates

Communication Authority of Kenya headquarters, Nairobi. [Edward Kiplimo, Standard]

Safaricom is appealing the decision by the Communications Authority of Kenya (CA) to cut the mobile termination rate (MTR) by 88 per cent, terming the move unprocedural.

The telco wants the CA decision to cut the rate that telcos charge each other for interconnecting customers from Sh0.99 to Sh0.12 declared invalid and set aside.

Safaricom has filed the matter before the Communications and Multimedia Appeals Tribunal and wants the matter certified as urgent given that CA wants the new rates to take effect on January 1.

It says CA ignored its own procedures and erred by using benchmarking methodology rather than the long-run incremental costing (LRIC) that has been used in previous reviews.

“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,” says the telco in its appeal.

The telco wants the tribunal to issue an injunction restraining CA from implementing the cuts until the appeal is heard and determined.

The reduced mobile termination rate is expected to translate into reduced calling rates. Airtel Kenya recently revealed that it has been paying Safaricom about Sh300 million per month under the current rates.

Safaricom says CA’s request for consultancy services to undertake a study and review the rates had formed a promise that the regulator was going to use network cost study, only for it to publish rates without giving the basis.

This, the telco says, means CA arrived at reviewed termination rates before the conclusion of the procedure it initiated through issuance of a request for proposal.

Safaricom, which is accusing CA of ignoring public participation, says it was not given an opportunity to be heard and make representations before the final decision was arrived at.

“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.

Safaricom adds that CA did not furnish it with the information, materials, and evidence it relied on in making the decision to reduce the MTR and fixed termination rates (FTRs).

CA is also being accused of arriving at a determination that is “opaque” and “cannot be independently verified” since the countries it says it benchmarked against reviewed rates after undertaking a cost-based study.

The papers filed at the tribunal show that Safaricom had in a letter dated August 10, 2021, as its submissions to CA, opposed the use of the benchmarking methodology approach in reviewing of MTRs and FTRs.

Safaricom’s position was that whereas the methodology was cost effective and a speedy avenue to review the rates, the same would not necessarily address some market concerns or accommodate the current market dynamism.

The telco had told CA that it was siding with the Global System for Mobile Communications Association (GSMA) position that benchmarking is “fraught with difficulties” and should only be a last resort when a cost-modelling approach is difficult.

Further, Safaricom had argued that MTR and FTR reviews are typically undertaken when markets are deemed to be efficient, where all players have equally invested in infrastructure that allows them to recover their costs in a similar manner.

The telco said this is not the case in Kenya where “two out of the three players do not own their own infrastructure,” which forms a significant consideration in estimating the cost of terminating calls.

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