Mobile phone firms expect dip in earnings

August 25, 2010
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, NAIROBI, Kenya Aug 25 – The massive reduction in calling rates in the telecommunications industry spells doom for mobile phone operators’ revenues accrued from voice calls, an industry player has said.

Telkom Kenya Managing Director and Chief Executive Officer Mickael Ghossein said with the new rates that are being charged in the market now, it will be difficult for the firms to make any substantial revenues from voice calls.

“We are not going to get any revenues from voice. Voice is dead; it is finished,” he said while also referring to the major investments that are needed in the sector and the need to run a sustainable business.

Currently, voice services account for over 90 percent of the operators’ revenues but with the cut-throat competition in the market following the slashing of the termination rates by 50 percent to Sh2.21 per minute, this is expected to come down significantly in coming months.

The situation is especially dire for Telkom, which operates under the ‘Orange’ brand as the interconnection rates for fixed lines to mobile is still Sh2.21 whereas the charges for a mobile call to a fixed line is pegged at Sh1.67.

The integrated communication solution’s firm terms this as ‘unfavourable’ considering the operating and maintenance costs for these networks that it has to incur and argues that this thins their profit margins.

“One of the challenges we are currently addressing with the CCK (Communications Commission of Kenya) is the fact that despite our prior feedback on the subject, the determined interconnection rates currently set at Sh1.67 for our fixed and fixed wireless networks is unfavourable,” complained Mr Ghossein.

The CEO however said that Telkom Kenya plans to leverage on their data, value added services and better network quality to ensure that its business is sustainable.

“My strategy is to strengthen the company, to improve its revenues, create jobs for Kenyans and to continue investing in the market. We will also continue with our focus on strengthening our distribution services and network capability,” he vowed.

Despite their complaints, Telkom announced a reduction of their calling rates where besides making on net calls at Sh2 and off net calls at Sh4 per minute subscribers will enjoy free calls seven hours in a day.

“Now the customers have an option to top up Sh100 a month and he will get free calls from 10am to 5pm across all Orange networks such as Orange mobile, wireless and the landline,” announced the CEO.

The firm however hopes that its concerns, which also include the need to have its CDMA (Code division multiple access) classified under GSM (Global System for Mobile Communications) will be addressed by the authorities.

The announcement came even as the regulator commended the operators for passing on the benefits of reduced interconnection rates to the consumers.

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