Essar Telecom Kenya has warned that the telecommunications sector might have to hike call rates and money transfer prices soon.

Madhur Taneja, the country manager said this is due to delay in reduction of the Mobile Termination Rates and also the introduction of a 10 per cent duty on mobile money transfer service.

"Price increases in this industry is inevitable," he said yesterday while announcing that yuMobile had hit the 3 million subscriber mark.

"We were counting on a reduced MTR to keep the call cost at the lowest , but we have waited for one and a half years now," said the head of yuMobile, which charges Sh3 for cross network calls and Sh2 a day for unlimited on-net calls.

Essar and Airtel have been pushing for a further cut in the interconnection rate from the current Sh2.21 to Sh1.44, but their competitors Safaricom and Telkom Orange are opposed to reduction.

"The 10 per cent tax will have to reflect on the cost of money transfer," said Taneja. yuCash has been offering free cash transfer and says treasury did not consult the industry on how to go about the new tax.

yuMobile said it targets to return profits by 2014, six years after its entry in this market. Taneja said its revenues had grown more tan 100 per cent in the last one year.

"Our revenues will still come from increased subscriber base, but the more numbers we have, the more economies of scale we will enjoy," he said. It now has 9.8 per cent of the market share, out of the 30.6 million registered numbers.