Kenya: Push for a Minimum Calling Rate By Orange Could Raise Airtime Costs
Calling rates could rise to a minimum of Sh4.42, if a request by Orange-Telkom to the government to set a minimum calling rate is heeded. The company wants to set the minimum rates to shield mobile phone companies from revenue losses.
The rate, Orange-Telkom CEO Michael Ghossein said, should be double the mobile termination rate. At the current mobile termination rate -- the amount an operator pays if subscribers call another network -- of Sh2.21, the minimum price should be Sh4.42 per minute.
"If we don't do this, we will kill the industry," Mr Ghossein said. He was speaking on Tuesday during the launch of the Angukia loyalty product.
Currently Safaricom and Orange have the highest off-net calling rates at Sh4.00 per minute. Airtel and YuMobile charge Sh3.00 per minute. With Sh2.21 paid to the terminating company, the operator is left with less than 80 cents in revenue.
In 2010, the Government slashed termination charges by 50 per cent from Sh4.42. Lower rates have favoured smaller firms whose subscribers make most of the off-net calls, while eating into a revenue stream for the bigger companies.
Lower rates also sparked a price war as Bharti Airtel and YuMobile gained the headroom to lower their tariffs. A 47.4 per cent drop in the profits of market leader, Safaricom, was largely attributed to the price wars.
Ghossein warned that telecom companies would not be able to expand in line with the upcoming devolution, if termination rates continue eroding profits. He suggested asymmetric charges determined on a case-to-case basis for each telecommunications company. The firm also intends to write to the Communications Commission of Kenya requesting a review of the mobile termination rates.
Pleas by Safaricom to the industry regulator for a similar audit were spurned two weeks ago. The French-owned firm has been struggling to manage expenditure in the low-profit environment. Ghossein revealed that the company would be undertaking cost-cutting measures in the coming months. It will also focus on its data offerings as an alternative revenue source.