Safaricom to lose Sh1.5bn in new tariff deal

SafaricomIt is set that Safaricom will lose about Sh1.5billion in revenue a year despite a deal with rival mobile telcos to implement a smaller cut on Mobile Termination Rates (MTR) than earlier ordered by the industry regulator, the Communications Authority of Kenya (CA).

MTRs are the charges levied by a mobile service provider on other operators for terminating their voice calls on its grid.

Safaricom is the major beneficiary of the MTRs due to its leading market share in the voice business, with the telco recording a net gain of Sh3.8 billion from its rivals Airtel Kenya, Telkom Kenya, and Equitel in the year ended June 2021 under the current tariff.

The telecommunications regulator is planning to reduce the Mobile Tariff Rates from the current Sh0.99 to Sh0.12.Safaricom, which has been receiving roughly Sh3.5 billion annually, will be left with a paltry Sh106 million.

Mr. Mucheru told senators that, when the Communications Authority of Kenya (CA) last year analyzed MTR rates, it realized the money Safaricom had been making in interconnection fees was more than seven times its rightful share.

Mr. Mucheru accused Safaricom of generating revenues from the interconnection fees, yet the MTR rates are meant to allow service providers to recover the costs incurred when other players use their infrastructure.

The telco, which has a 67.8 percent market share in the voice market, had told the tribunal that the regulator should have used a cost-based study to inform its decision rather than the benchmarking methodology it relied on.

Most calls are now made on mobile telephony networks and the reduction of the tariff to Sh0.58 per minute could give the telcos headroom to further reduce calling charges.

The net beneficiary is Safaricom PLC, which received Sh883 million while the net losers are Airtel Kenya and Telkom Kenya, which pay out Sh845 million and Sh115 million respectively,” ICT Cabinet secretary Joe Mucheru told a senate committee in March.