In a move aimed at protecting the smaller telecommunications companies the rates or call charges placed by Safaricom on its rivals for ending calls on its network, could soon be controlled by the Kenyan government.
With the new regulations which intend to stop dominant telecommunications companies from making any profits from Mobile Termination Rates (MTRs), telecommunications giant; Safaricom will only charge enough fees to cater for the costs of interconnecting calls from its competitors.
The Kenya Information and Communication (Interconnection) Regulations 2022 will now make it possible for the Communications Authority of Kenya (CA) to control the rates of interconnecting calls charged by Safaricom to its competitors. This is due to the fact that the telecommunications company controls a total of over 25 percent of the mobile services revenues generated in Kenya.
The Mobile Termination Rates (MTRs) are the charges which are imposed by a mobile service provider or telecommunications company on other mobile service providers or telecommunications companies for the termination or ending of calls in its own network.
With the Kenya Information Communications Act, 1998 a telecommunications company becomes dominant when it controls more than 25 percent of the revenues in the telecommunications sector or when a telecommunications company has a significant market share that puts it at a more vantage point against its competitors.
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Safaricom’s name must however be published in the Kenya Gazette in order to officially be seen as a dominant telecommunications company and for the Kenyan government to be able to step in and then control Safaricom’s Mobile Termination Rates (MTRs).
Airtel Kenya and Telkom Kenya have at different times continued too push and advocate for lower Mobile Termination Rates (MTRs), making it known that the rates as they stand continue to negatively impact their revenues as well as their ability to properly compete with Safaricom.
According to the Kenya Information and Communication (Interconnection) Regulations 2022, “A dominant telecommunications licensee shall adopt the cost-based charges for interconnection as set out by the Authority from time to time.”
The Kenya Information and Communication (Interconnection) Regulations 2022 also states that, “A dominant telecommunications service licensee shall set charges for interconnection based on an objective criterion, observe the principles of transparency and cost orientation.”
Although with the Kenya Information and Communication (Interconnection) Regulations 2022 the telecommunications companies will be permitted to negotiate the Mobile Termination Rates (MTRs) as they see fit, the Communications Authority of Kenya (CA) will be allowed to step in and implement lower rates if the dominant telecommunications company is unable to reach an agreement with its smaller competitors. Data from the Communications Authority of Kenya (CA) has revealed that Safaricom now has more than a 25 percent share of revenues in the sector.
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According to reports, the telecommunications companies in Kenya made 280.1 billion Kenyan Shillings in revenues from the telecommunications sector. Safaricom reportedly took home a total of 83.8 percent of the Short Message Service (SMS) revenues, 78.4 percent of the data revenues, 82.4 percent of the voice revenues and 97 percent of the revenues generated from other mobile services.
In a bid to make it more affordable for Telkom Kenya and Airtel Kenya to end calls on Safaricom’s network the dominant telecommunications company, will also have to provide proof that its Mobile Termination Rates (MTRs) are indeed based entirely on actual costs.
The Kenya Information and Communication (Interconnection) Regulations 2022 are coming at a period when Airtel Kenya and Telkom Kenya have continued to insist that the Communications Authority of Kenya (CA) should reduce the Mobile Termination Rates (MTRs) and also make it possible for both telecommunications companies to pay as much as 50 percent less than Safaricom in order to effectively protect their revenues.
Airtel Kenya revealed that it pays 300 million Kenyan Shillings to Safaricom every month or 3.6 billion Kenyan Shillings each year in Mobile Termination Rates (MTRs) and pointed out that the expensive payments have taken a significant chunk out of its revenues.
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In December of 2021 the Communications Authority of Kenya (CA) dropped the Mobile Termination Rates (MTRs) from 0.99 Kenyan Shillings per minute, to 0.12 Kenyan Shillings per minute and made it known that the proposal brought forward by Airtel Kenya, would later be reviewed in a cost evaluation.
Due to Safaricom opting to appeal the tariff review, the new Mobile Termination Rates (MTRs) have not yet been implemented.
The hearing for the case in question, took place in April of 2022. It is believed that the new Mobile Termination Rates (MTRs) pricing regulations which have been proposed might lead to major resistance from Safaricom. This is because the telecommunications giant has previously opposed other attempts by Airtel Kenya to cause a change in the Mobile Termination Rates (MTRs) which have been levied.
Safaricom has in recent times made it known that any more reduction in the Mobile Termination Rates (MTRs) could negatively affect profitability as well as the revenues generated. The Communications Authority of Kenya (CA) however, disagreed with the argument brough forward by Safaricom and stated that there are enough buffers in place to effectively absorb any revenue losses because it is dominant in the telecommunications market.
Smaller telecommunications companies in Kenya typically pay more in Mobile Termination Rates (MTRs) due to the fact that their users will almost certainly spend more time on other telecommunications network than its own telecommunications network.
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Safaricom has been accused by Airtel Kenya of slashing their prices to much lower levels than the prices of their competitors and also making said prices lower than the actual costs of said services resulting in it becoming harder for telecommunications companies to compete and generate profit.
Telkom Kenya and Airtel Kenya have stated that the present Mobile Termination Rates (MTRs) have led to it being difficult for them to be able to compete with Safaricom.
The Communications Authority of Kenya (CA) had previously stated that the Mobile Termination Rates (MTRs) will positively impact both the consumers and the operators and will eventually reduce the cost of making calls across all telecommunications networks operating in Kenya.
Airtel Kenya had in the past tried to get the Communications Authority of Kenya (CA) to review the structure of the Mobile Termination Rates (MTRs) to ensure that smaller telecommunications will pay 50 percent less than Safaricom. The attempt however, was not successful.
The situation in Kenya’s telecommunication sector is identical to a situation that occurred in Europe where new telecommunications companies into the scene as well as smaller telecommunications already operating, enjoy significantly reduced Mobile Termination Rates (MTRs) for a period of up to four (4) years. This is because four (4) years is seen as enough time to reach a market share of anywhere from fifteen (15) percent to twenty (20) percent which is seen as the Minimum Efficient Sale.
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A significant number of countries all over the world have implemented a Mobile Termination Rates (MTRs) structure termed the Asymmetrical Model in a bid to help new telecommunications companies in the scene, as well as smaller telecommunications already operating in their respective telecommunications sectors.
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