PRICE WAR LOOMS AS SAFARICOM REJECTS CALL RATE REDUCTION.
Safaricom, Kenya’s largest phone carrier, worries that cutting Mobile Termination Rates (MTR) by 897.7% may trigger new pricing wars in the sector, even though the purpose is to lower call rates between networks.
People fear Safaricom and its rivals will battle. Some of its competitors are fine with further MTR decrease because it will lower their Safaricom network fees.
The other provider must pay a MTR to cease calls in a cell provider’s network. Therefore, the Communication Authority of Kenya (CA) proposes to cut the maximum MTR charge from Sh0.58 per minute of link to Sh0.06.
This latest drop worries individuals that rival mobile network operators (MNOs) would be able to lower call prices even more for their clients, attracting Safaricom users.
Thus, Safaricom may be forced to lower its prices to compete. Safaricom’s busy-time call rate is Sh4.87, including taxes.
Airtel’s minute rate is Sh4.3. Telkom offers Sh1.5-per-minute calls to any network.
Safaricom CEO Peter Ndegwa told the National Assembly’s Communication, Information, and Innovation Committee that reducing prices could hamper investment and cost the government money.
Safaricom CEO Peter Ndegwa told the Nationals Assembly ICT committee, “Price wars have been seen to lead to lower market value, slowing industry expansion and ultimately leading to lower and slower GDP contribution by the sector.”
This was true even though lower rates benefited customers.
MTRs lower save competitor networks money they pay Safaricom. Telkom Kenya Ltd, Airtel, and Jamii Telecom Ltd are thrilled about the Sh0.06 per minute rate reduction.
They claim that customers would profit and the government will lose little.
“People will switch to WhatsApp calls if we keep these rates high.” We will lose what we are pretending to safeguard.
We heartily support the CA’s Sh0.06 rate reduction request. “Consumers want affordable, convenient services,” said Airtel Kenya Managing Director Ashish Malhotra.
“Now is the time to do the right thing.” The Sh0.06 per minute price supports the government’s experience. Telkom Kenya CEO Mugo Kibati said, “The rate is about customers.”
Safaricom has benefited most from increasing MTRs because to its 60% call market dominance. Voice consumers’ financial contributions are declining as more individuals utilise the internet.
In August 2022, CA reduced MTR across all networks from Sh0.12 to Sh0.58. From April 2023, Safaricom lost Sh1.1 billion in four months.