The cost of making calls to mobile phones within Kenya is expected to decrease further next year, in a major reprieve for hard-pressed Kenyans.
This is after the communications regulator reduced the amount that operators can charge each other for connecting calls to their network.
Mobile termination rates were last established in 2015, but on Saturday, the regulator declared a 30 per cent reduction in the rate from 0.59 per minute to 0.41 per minute.
These new cuts will be implemented in March of next year and will be in place for two years. The costs of SMS will however remain unchanged.
The cut to the calling rate will come as a huge relief for Kenyans who are grappling with a higher cost of living amid increased expenses for food and energy.
The Communications Authority of Kenya (CA) said on Saturday the new rate is informed by the prevailing economic environment, ICT market dynamics and the need to strike a balance between the promotion of investment and the protection of consumers.
“This decision will have positive outcomes for both the consumers and operators,” said CA acting chief executive Christopher Wambua in a statement.
“Consumers will now enjoy access to a variety of affordable services across networks while operators will have more price flexibility in developing more affordable products.
Analysts said they expected operators like Telkom Kenya and Airtel to be the main beneficiaries of the cut, along with consumers.
Revenues for the larger operator Safaricom would likely fall but the impact would be more limited for its earnings. Safaricom earns about Sh5.1 billion per year when customers call its network from other networks official estimates show.
Industry data shows that the rate has been falling gradually from a high of Sh4.42 in 2011 to the current Sh0.99, which has been in place since 2015, marking a freeze of more than five years amid intense lobbying by some top telcos.
The rate cut could spark a price war should mobile phone operators opt to lower call tariffs for their customers.
A previous cut in the rate in 2010 from Sh4.42 to Sh2.21 sparked a price war between Kenyan operators. A smaller operator tends to pay more in mobile termination rates because its users are likely to spend more time on other networks than its own.
The lower termination rates, which could lead to lower calling, rates could benefit subscribers already grappling with reduced spending power due to the adverse effects of inflation and a raft of new taxes.
The financial hardships are squeezing consumers hard, posing an economic and political problem for President William Ruto’s administration.
Mobile operators have in recent months adjusted the cost of calls to other networks to reflect the recent change in excise taxes.
Airtel now charges Sh2.78 to make calls to other networks per minute while Safaricom and Telkom charge Sh4.87 per minute and Sh4.30 to call rival networks respectively.
The mobile termination rate was 2012 cut to Sh1.44 per minute from Sh2.21 and subsequently to Sh0.99 in 2015. Then President Mwai Kibaki had in 2011 stopped further cuts after operators said their business was under threat from sliding revenues.
The latest industry data from the CA shows mobile subscribers in the three months to June stood at 66.4 million in Kenya, indicating significant growth opportunities for mobile service providers. Safaricom’s share of the voice market in June stood at 42.7 million cementing the telco’s dominance.