In Brief

Safaricom revenues in more trouble as MPs seek zero MTR

MPs are urging the Communication Authority of Kenya (CA) to halt the implementation of new termination call rates set to take effect in March next year. Instead, they propose a further reduction to 0.06, aligning with a study conducted by Tilil Technologies and Acacia Economics for national roaming telecommunications. The CA had previously announced a 30 percent reduction in Mobile Termination Rates (MTRs) from 0.59 per minute to 0.41 per minute.

MTRs and FTRs represent the costs that telecommunications companies charge each other to facilitate customer communication. The proposed MTRs and FTRs will only apply to local voice traffic, specifically calls originating and terminating within the geographical location of Kenya.

While the revenue of the major operator Safaricom is expected to decline, the impact on its earnings is anticipated to be relatively limited. Safaricom currently earns approximately Kes5.1 billion annually when customers call its network from other networks, according to official estimates. The rate cut could potentially initiate a price war if mobile phone operators choose to lower call tariffs.

This not only affects the telecommunications giant but also poses a financial challenge for the Kenya Revenue Authority (KRA), which is estimated to lose about Kes2.5 billion due to the Safaricom call rate tariff cut. The revised MTRs and FTRs are scheduled to be in effect for approximately two years starting from March next year.

This decision is expected to yield a potentially positive outcome for both consumers and operators during challenging economic times, striking a balance between promoting investment and safeguarding consumer interests.

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