How Consumers Could Benefit From Reduced Mobile Termination Rates

The majority of Kenyans do not spend a lot of money for calls or on their phones generally because these are low-spending people.

CA DG Ezra Chiloba

The termination rates debate is still hot for two primary reasons, all led by operators. On one side, Safaricom wants the CA to rethink the new KES 0.12 per minute proposed fee, which is substantially lower than what was there before (KES 0.99 per minute). The other side, which includes the likes of Telkom and Airtel Kenya wants proposed rates implemented for a variety of reasons, some of which we have highlighted here and here.

At the core of this tussle is a revenue model. Safaricom makes a killing from termination fees, because the competition (read Airtel and Telkom) obviously is more inclined to make off-net phone calls, and that goes without saying that smaller operators are at a disadvantage. To put this in context. Safaricom’s market share is at more than 64 percent as of September 2021.

Lower rates will see the consumer pay less for calls

As we had said earlier, the reduction in termination fees will effectively lead to lower phone bills for Kenyans.

Operators may sometimes restructure their phone pricing, but fair competition (based on the regulation of the termination fees) will surely play an essential role in a continued downward trend in phone bills, as well as affordable mobile phone usage in Kenya.

There are more merits to this. Specifically, the majority of Kenyans do not spend a lot of money for calls or on their phones generally because these are low-spending people.

Higher phone bills have in the past alienated them from topping up their phones to say, reach out to friends and family.

However, lower termination fees have a far-reaching effect in that they will help low-spending phone users from giving up their phone subscriptions or connections.

In fact, this is the basis of why operators such as JTL exist. They know the market is led by a single operator, and others follow, but from a distance. In such a scenario, there are millions of customers who would jump ship to a more affordable operator because they cannot be served under existing costing approaches.

The CA’s play

Consumers should be happy that the CA is regulating mobile termination rates because inconsistent regulation ends up hurting customers in the long run.

In the past, it has become apparent that the rates have tilted the competition in favour of a leading operator to the detriment of struggling ones. This is more apparent in the sense that people that use Telkom or Airtel make off-net calls because the majority of their friends and family are on a more established telco.

Thorough regulation can also help customers access modern and cutting-edge technologies brought forth by operators. Specifically, it is obvious that the telco space in Kenya impedes investment in next-generation networks, especially for smaller players. This was seen when 4G services were launched locally because Safaricom was the first to bring the service to the masses, and others followed years later.

We are also seeing the same thing with 5G rollout.

READ MORE: State of 5G in Kenya: What to Expect in 2022

Overall, you could argue that inconsistent regulation in the past has resulted in higher phone tariffs for the general Kenyan, but the proposed rates at KES 0.12/minute are a step to the right direction.