Airtel, Telkom bid to have Safaricom levy higher rates flops
Proposals by Airtel and Telkom Kenya that could have seen Safaricom forced to charge its customers higher rates than its rival telecommunications providers have been rejected by consultants hired to assess competition in the sector.
Airtel and Plum Consulting (on behalf of Telkom Kenya) had separately written to the ministry of ICT last year asking that Safaricom pays a higher fee for calls and texts completed on its rivals’ networks.
The fee, technically referred to as a mobile termination rate (MTR), has been set at Sh0.99 for calls and Sh0.05 for text messages since 2010.
The MTR is paid whenever a customer calls or sends a message to a network other than their own and has implications on the costs that an operator passes on to subscribers.
The proposal for an asymmetrical MTR has been rejected by Analysys Mason on the grounds that Kenyan companies are already paying low fees relative to companies in other global markets.
Asymmetric MTR, the firm writes, is meant to cushion new players in a market and this is not the case locally.
“In Kenya, even though Safaricom clearly has greater economies of scale than other mobile operators, these other operators have been in the market for a long time and should not be ‘rewarded’ for having smaller scale,” reads the draft report in part.
Although the current MTR is standard for all operators, calling trends in Kenya mean that it favours Safaricom. Most of Safaricom’s 26.6 million customers only call within the network.
On the other hand, Airtel has the highest proportion of off-net traffic and finds itself having to pay out relatively high MTR fees.
The report also shows that Airtel had written to the government proposing that a price-floor be set on Safaricom’s retail services.
This would have meant that the market leader is not allowed to lower costs below a certain threshold. Such a price floor, Analysys Mason has said, “places unnecessary restrictions on Safaricom’s ability to innovate with its tariff plans and promotions”.
This is not the first time a minimum call rate has been proposed for the market. In the midst of a price war, operators had in 2012 called for a minimum calling rate to be set at 50 per cent above the MTR fee to discourage the race to the bottom. The proposal was later rejected by the industry regulator.
Analysys Mason was hired to carry out a study on competition in the telecoms sector amid outcry by the smaller firms that the operating environment was too harsh.