The mobile termination rates (MRTs) debate has been ongoing for a couple of days now, and that’s for good reason because there are some pressing issues that are yet to be addressed by the ICT regulator the CA, as well as input from the so-called ‘smaller’ telcos, namely Airtel and Telkom Kenya who have complained in the past that the outgoing rates (KES 0.99 per minute) were on the higher side and that the proposed rates (KES 0.12 per minute) are the right mix of fairness and competitiveness in the carrier business space.
Airtel Kenya, alongside Telkom, has made a case for itself and why it supports the rates. On the other hand, Safaricom is objecting the new fees, and one of the major reasons why this is the case is that the CA failed to consider public input prior to arriving at the KES 0.12/minute rate.
To take you back, Airtel had argued that high MTRs continue to be a burden to small operators, and have made them hard to compete with leading telcos. More details on Airtel’s rationale can be read here.
However, is Safaricom really a dominant player, and high MTRs have always favoured it in terms of revenue amassed?
Competitors think so, and here are some of their reasons.
Safaricom, of course, is the dominant player in the voice market. This is further echoed by the sector statistics report for the first quarter of the 2021/2022 FY, which summarizes voice traffic per operator as shown below:
Additional data revealed that Safaricom’s mobile subscriptions are at 64.5 percent as of September 2021. Airtel and Telkom follow at 26.4 percent and 6.4 percent, respectively. This means that Safaricom’s market share surpasses the dominance threshold of 50 percent, and its revenue market share is even higher at 80 percent or more.
However, the CA, and the industry as a whole have not declared Safaricom a dominant player, even when past studies have shown so. Smaller operators have also been requesting the CA to make the declaration for an extended period.
Another argument is that Safaricom participates in anti-competitive behaviour, with product pricing that has been termed as ‘predatory.’
Airtel’s last submission to the CA complained about a promotion run by Safaricom, which was under costs by taking into account the MTR.
Safaricom was giving an offer of Kshs. 20/=, which gives consumers 20 minutes and 20 MBs. Other operators wishing to replicate a similar offer would incur losses. – says Airtel Kenya
Other segmented offerings of, for instance, KES 20 tat provide KES 20 minutes for on- and off-net calls, where traffic is split for the segment for customers is such that 82 percent of the traffic is off-net, which means that for evert KES 20 that, say, Airtel receives from customers, it incurs a cost of KES 16.24. This implies that the operator incurs a negative margin.
These are some of the issues that were submitted to the CA to guide the revision of the MTR.
It is also for these reasons that small operators recommended the CA to implement an asymmetry interconnection rate of 50% so that the dominant operator pays twice as much MTR as the smaller operators would pay to it.
Looking at these numbers, do small operators make sense of their arguments, that the reduced MTRs are actually good for their business and their customers in an imbalanced space?