Capital FM (Nairobi)

26 November 2012

Kenya: Interconnection Drop to Lower Call Rates

Competition in the telecommunication industry in the country is expected to go a notch higher after the Communications Commission of Kenya (CCK) on Monday announced a drop in the Mobile Termination Rate (MTR) to Sh1.44 from the current Sh2.21.

The new rate which mobile phone operators charge for interconnecting customers is backdated to July 1, 2012. CCK Director General Francis Wangusi said the conclusion by the CCK to go on with the glide path was subsequent to a study by a consultancy firm on the effect of lowering the MTR.

"Considering that the commission suspended the glide path in order to evaluate these issues as presented by the industry, the board has, in its sitting today, resolved to re-instate the glide path and implement the 2nd phase of the Mobile and Fixed Termination Rates with effect from 1st July 2012,"Wangusi told journalists.

The mobile operators are now expected to follow suit immediately but customers may have to wait a little longer to see if the move will bring the competition required, to not only see call rates drop, but higher quality service from telecos.

The move signals relief to telecos like Yu and Airtel that have been pushing for CCK to lower the rates. However Safaricom has been against it saying it would have adverse effects on the Kenyan economy.

But Wangusi said the study done by the Kenya Institute for Public Policy Research and Analysis (KIPPRA) established that competition would not affect the stability of tax revenue, employment, inflation, investments, performance of the telecoms shares in the stock market, stability of the Nairobi Securities Exchange, business process outsourcing and access and affordability of communications services.

Telecos will now be required to refund each other the extra money they charged since July 1 this year while under the current rate of Sh2.21.

"How operators will exchange their money in terms of paying to each other under the new termination rate is not our business. They know how they will equalize the equations and settle that," Wangusi said.

CCK has however warned all the operators not to abuse the move, by coming up with products that are aimed at jeopardising their competitors' business instead of encouraging healthy competition.

In August 2010, CCK reduced MTRs by 50 percent to Sh2.21, up from Sh4.42, a move that resulted in lowering of call rates in the country from an average of Sh12 per minute to about Sh4.

On-net call retail tariffs dropped significantly from a high of Sh7 per minute to Sh3 per minute over the same period.

If all goes well, CCK plans to continue with the glide path by lowering the MTR further to Sh1.15 in July 2013 and down to Sh0.99 in July 2014.

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