Mobile phone users in Kenya will be able to call at cheaper rates from the 1st of March 2024. ICT industry regulator the Communications Authority of Kenya (CA) has revised the Mobile Termination Rates (MTRs) and Fixed Termination Rates (FTRs). Following the review, call termination rates have been capped at KES 0.41 per minute. The SMS termination rate of 0.05 per SMS remains unchanged.
MTR is the fee paid by one mobile service provider to another for handling calls that come from the first provider’s subscribers and terminate on the network of the second provider. These are referred to as off net calls. Notably, the new rates of KES 0.41 per minute will only apply to local voice traffic, specifically calls originating and terminating within Kenya. The revised MTRs and FTRS shall apply for a period of two years from March next year.
It’s a significant drop from the current charge of KES 0.58 per minute for MTRs and FTRs . It is meant to facilitate communication across networks. However, it is still higher than the rate of KES 0.12 per minute that was set by the CA last year but disputed by Safaricom.
Meant to go live on Jan 1, 2022, Safaricom argued that the rates were not arrived at procedurally and that the CA failed to take note of stakeholder input submitted previously. Telkom Kenya, and Airtel Kenya, on the other hand, continued to support the new termination rates, with the overall argument being that the consumer will pay less when making calls, especially to other networks.
Safaricom Benefits From High MTR Rates
Being the dominate player in the industry Safaricom receives more calls from other networks. However, the call traffic from Safaricom to the other networks is not as high. To paint a picture 25.36 % of calls made on Airtel were off net, while only 6.4% of calls made on Safaricom were off net.
Thus, Kenya’s biggest telco makes good money when the Mobile Termination Rates are high. Data from Kenya Revenue Authority (KRA) indicates Safaricom makes about KES 5.1B in revenue per year from termination of calls at the current rate. The company expects to experience a huge revenue loss once the new rates come into effect. The previous reduction of the MTR by CA, saw Safaricom lose KES 2 billion in revenues in the last financial year.
CA maintains that the rate revision is in good faith and “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”.
Airtel Pays Highest Mobile Termination Rates
Consumers in Kenya are not the only ones who will find joy in reduced calling rates. This decision will have positive outcomes for both the consumers and operators. Operators will have more price flexibility in developing more affordable products.
Due to the imbalance in traffic between the different networks in Kenya, Telkom and Airtel pay Safaricom more for mobile termination. In the Financial Year ending March 2023, there were 10.99 billion off net calls made in Kenya. Calls originating from Airtel to other networks accounted for more than half with 6.82 billion calls. This means the operator pays the most to other networks for call termination. As Safaricom has about 66% market share, it is expected they receive the biggest share of this payment.
Reduction in termination races gives the smaller players greater price flexibility hence effective competition. Due to this, it is expected the reduction in costs will positively impact their revenues. Ideally, the small carriers will have a better chance to compete in the market. According to the KRA, Telkom Kenya is currently experiencing losses amounting to KES 103.5 billion. On its part, Airtel Kenya is facing losses of KES 57.2 billion.
Before the new rates come into effect, all operators must adjust their Interconnection Agreements in accordance with the Determination and submit their Deeds of Variation to the Authority no later than February 1, 2024.
Last time, Safaricom filed a petition before the Communications and Multimedia Appeals Tribunal. The telco dispute the new charges as soon as they were announced. It was after the dispute case that the current rate 0f KES 0.58 was arrived at. This time round, we wait to see if Safaricom will fight the KES 0.41 or it will let consumers enjoy making cheaper off net calls.