The Communications Authority of Kenya (CA) on Wednesday cut the rate mobile phone operators charge each other for interconnecting customers by Sh0.87 or 87.7 percent, signalling lower call tariffs.
The regulator cut the charges commonly referred to as mobile termination rate (MTR) from Sh0.99 to Sh0.12 to match shifts in technology that have made mobile telephony more efficient.
It’s unclear whether mobile operators, Safaricom , Airtel Kenya and Telkom Kenya will cut their call-tariffs in the wake of the reduction.
However, the firms are not obligated to cut the consumer calling tariffs to match the Sh0.87 cut in the termination charge.
“Consumers will enjoy lower calling rates following the review,” CA director-general Ezra Chiloba said yesterday through a press statement.
“The review was founded on the recognition that higher MTRs mean higher calling rates for consumers.”
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Industry data shows that the rate has been falling gradually from a high of Sh4.42 in 2011 to the just reviewed 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 cut could spark a price war should mobile phone operators opt to lower call tariffs. A previous cut in the rate in 2010 from Sh4.42 to Sh2.21 sparked a price war between Kenyan operators.
The CA said the cut will have a positive impact on both consumers and operators, adding the review will reduce the need for consumers to own multiple SIM cards as charges across networks come down.
“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,” said Mr Chiloba.
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 could benefit subscribers grappling with reduced spending power due to the adverse effects of the coronavirus pandemic.
Mobile operators recently 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 in 2012 cut to Sh1.44 per minute from Sh2.21 and subsequently to Sh0.99 in 2015. The then President Mwai Kibaki had in 2011 stopped further cuts after operators said their business was under threat from sliding revenues.
Analysts said they expected operators like Telkom Kenya and Airtel to be the main beneficiaries of the plan along with consumers.
Revenues for the larger operator Safaricom would likely fall but the impact would be more limited for its earnings.
Industry data from the CA shows mobile subscribers in the three months to December stood at 61.41 million, indicating significant growth opportunities for mobile service providers.
Safaricom’s share of the voice market in December rose to the highest level in three years, cementing the telco’s dominance.
The CA data shows Safaricom’s share of the voice market grew to 69.2 percent in the three months to December from 64.7 percent in September.
The regulator attributed the rise to Safaricom’s calls and mobile data promotion offers. Safaricom’s rising share of the voice market came as rivals Airtel and Telkom Kenya continued to lose grip.
“The increase is mainly attributed to Safaricom@20 Promotion that aimed at availing new subscribers of attractive voice and data bundle offers while offering similar incentives to their existing customers,” the CA said in an earlier report.
Airtel’s share of the voice market dropped to 28.5 percent in the period under review from 32.1 percent in September while Telkom Kenya’s share fell to 2.2 percent from three percent.
The last time Safaricom’s dominance of the voice market was higher than 69. 2 percent was in June 2018 when it stood at 70 percent.