Mark Muhumuza

30 August 2010

Telecom subscribers in Kenya are now enjoying reduced call rates after new interconnection rates were implemented. The Communications Commission of Kenya two weeks ago lowered the interconnection fees by half.

"We believe the glide path will provide an acceptable balance between the regulatory objective of attaining efficient cost levels as soon as possible while maintaining stability in the business plans for the operators," said CCK Director-General Charle Njoroge in a statement announcing the new rates.

Interconnection fee is how much and operator pays another for routing traffic through their networks.

This reduction in interconnection rates has prompted the reduction in call costs and could play a role on bringing more mobile phone users. Kenya's mobile penetration just recently reached the 19.9 million users mainly because of ownership of just more than one sim card.

Kenya has four telecom companies, Safaricom, Orange, Zain and Yu. Price wars have already taken shape. Zain Kenya which is Kenya's second largest mobile operator was the first one to slash its call rates to Kshs3 ($0.02) per minute on the day the new interconnection rates were announced.

Industry experts in Kenya had said these new rates were denting setback to Kenya's largest mobile phone operator Safaricom. The mobile company has been offering higher call rates than its other competitors.

Last week Safaricom then made the announcement that it was slashing its call rates to Kshs3($0.02) per minute for calls to other networks for a month. This is 70% drop in the cost of making a phone call.

The ignited price wars seemed to have brought a lifeline to mobile phone users however only Orange Telcom (Telkom Kenya) is yet to offer these new rates as it still seeks to block the implementation of these rates. Yu, Zain and Safaricom are now offering similar call costs across their networks.

The aim of CCK is that by 2013 the interconnection rate should be about Kshs0.99. Effective September 1st 2010 CCK will terminate calls to other networks from Sh4.42 to Sh2.21. Even before the date for this to be officially implemented, rates have reduced significantly.

These price wars clearly show that profit margins may reduce as people spend less on airtime. This means companies would rely on other services. Safaricom is the market leader with the award winning M-pesa and the data and internet services.

In Uganda however, the Uganda Communications Commission implemented new call rates in effective July 6th 2010 but telecom companies have not cut their prices. The companies remain tight lipped on the issue saying that they are still dealing with the legal issues.

Uganda's largest operator MTN had previously put an injunction for these new rates to be published. Ugandan telecom companies are still charging their customers a lot from calls across all networks. The price wars have also existed in the market but they are still on a promotional basis and cannot be relied on in the long run.

(UCC) announced that the rate for mobile and fixed line termination is at Ushs131($0.05) each while SMS termination has been placed at Ushs30($0.13). However telecom companies still charge as high as Ushs480 per minute.

When contacted on when they would reduce on the rates, the companies remained non-committal on the issue.

"We are still seeking guidance from our legal team," Zain Uganda Head of Corporate Affairs Fred Massadde told East African Business Week.