CS Mucheru downplays Safaricom’s huge call termination earnings

ICT Cabinet Secretary Joe Mucheru has defended the government’s stand against declaring Safaricom a dominant player saying the telco has lost more than 20% of its market share in the last decade.

CS Mucheru has told a Senate Committee on Information and Technology that Safaricom’s annual termination fees stands at Kshs. 1 billion against Kshs. 300 billion paid by the industry in interconnection fees payouts.

The Communications Authority of Kenya (CA) had proposed to cut Mobile Termination Rates (MTR) to Ksh. 0.12 from Ksh. 0.99 which was meant to be effective from January 2022, saying it will benefit consumers and ensure business continuity for network providers.

MTR is the price that a mobile telephone operator charges another mobile operator for terminating its off-net calls on its network and its reduction is expected to give small operators price flexibility.

CS Mucheru told senators that the tariffs reduction and competition in the country’s telco space do not display dominance tendencies by any market player.

“We have observed that due to the current imbalance of off-net traffic volume in a quarter, about Kshs. 1 billion is paid out amongst operators as interconnection fee. The net beneficiary is Safaricom which received Kshs. 883 million,” said Mucheru.

According to CA termination rates are not meant to be income-generating streams but cost recovery mechanisms.

“The essence of interconnection is actually to provide leverage to the mobile operators to reduce the retail rate they charge customers. It has not in any sense contributed to monopoly,” said Matano Ndaro, CA Director for Licensing, Compliance and Standards.

The Competition Authority of Kenya (CAK) on its part says its analysis on the impact of a review of termination fees on industry players was based on their revenues, levels of profitability, and sustainability.

According to the competition watchdog, lower voice termination rates would facilitate greater retail price flexibility, which should facilitate a reduction in overall price levels for mobile services benefiting consumers.

Small players had requested a review of the current MTRs to at least Ksh. 0.15 to enable them to offer discounts as low as those offered by Safaricom, whilst still maintaining their profitability.

  

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