Telco Wars: Chiloba Battles Safaricom Over Lower Rates

The Director-General Ezra Chiloba-led Communications Authority of Kenya (CA) has doubled down on its decision to lower the Mobile Termination Rate (MTR), disclosing advantages enjoyed by the market-leader Safaricom over its competitors.

The regulator was responding to a case filed by Safaricom at the Communications and Multimedia Appeals Tribunal seeking to stop the slashing of the mobile termination rate (MTR) by 87.7% – to Ksh0.12 per minute from Ksh0.99 per minute.

The MTR is the rate telcos charge each other for interconnecting customers. The review was announced by Chiloba in December and was to take effect at the start of the year before Safaricom moved to court

Safaricom told the court that CA should have adopted a cost modelling approach as opposed to international benchmarking to determine termination rates. The company further maintained that public participation was not properly undertaken – stating that stakeholders including itself were allegedly not given a chance to voice their concerns.

Safaricom warned that it would incur losses if the decision was allowed to take effect. Their biggest rivals Telkom and Airtel, as well as the Consumers Federation of Kenya (Cofek), however, joined the case backing Chiloba and CA.

In its latest responses, CA cited a need to level the playing field. The regulator argued that Safaricom’s ability to regularly offer discounts and promotions on voice services at rates lower than the MTR was due to their low cost of operations.

CA argued that it was practically impossible for smaller players to compete.

“In fact, in the years 2020 and 2021, the appellant (Safaricom) successfully ran a number of promotions and special offers targeting voice services where the effective discounted rate per minute for both on-net and off-net calls is as low as Sh0.2.”

“Where the appellant prices its call rates below the Sh0.99 termination rate, it would be impossible for competitors to viably replicate such offers, given that they face the termination rate as a marginal cost,” they stated.

The decision to lower the MTR reportedly came against the backdrop of intense lobbying from a section of telco operators. It was the first review of the MTR in six years. The rate has fallen consistently from Ksh4.42 in 2010 to Ksh0.99 in 2015 and, now, Ksh0.12.

“Consumers will enjoy lower calling rates following the review. The review was founded on the recognition that higher MTRs mean higher call rates for consumers,” Chiloba had noted in a statement.

In 2010, reduction of the MTR from Ksh4.42 to Ksh2.21 sparked an all out price war among operators resulting in cheaper call rates. CA had also highlighted its expectation that the MTR review would reduce the need for consumers to own multiple SIM cards. Many Kenyans own mutliple SIM cards to avoid the higher call rates charged when calling people on a different network.