yu joins Airtel in petition on lower MTR

September 5, 2012
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Country Manager Madhur Taneja on Wednesday said industry players have waited a year for the adjustment to be made/yU
NAIROBI, Kenya, Sep 5 – Local mobile operator yuMobile has joined Airtel in calling for the speedy implementation of the reduced Mobile Termination Rate (MTR).

Country Manager Madhur Taneja on Wednesday said industry players have waited a year for the adjustment to be made, after the MTR was frozen at Sh2.21 last July, failing to keep to the glide path set by the Communications Commission of Kenya (CCK).

“From Sh4.42 it (MTR) was supposed to go to Sh2.21 in July 2011, thereafter Sh1.44 in 2012, then Sh1.15 in 2013 and Sh0.99 in 2014,” he explained.

Apart from impacting call charges and subscriber base growth, Taneja said failure to reduce the MTR will continue to create an uneven playing field in the telecommunication sector.

The MTR is the charge a mobile operator pays to terminate calls to other operators and the fee forms part of the call charges associated in calling other network subscribers, which inevitably impacts the end-cost a subscriber will pay for an off-net call.

Speaking on the matter, Safaricom CEO Bob Collymore said with the local telecommunication industry operating at a loss and not attracting much investment, lowering the MTR will only worsen the situation.

“If you take last year, Safaricom made a profit of about Sh18 billion, Telkom Kenya made a loss of about Sh18 billion, the other two operators also made a loss. So when we talk about reducing MTRs all that it does is shift the loss from one point to the next, it doesn’t improve the economics of the industry,” he said.

When the glide path was first applied in 2010, mobile tariffs fell by more than 50 percent and the major mobile operator fears there will be a resurgence of price wars in the market if the MTR is reduced.

However since July 2010, subscriber growth catapulted from two million a year to five million a year.

Airtel petitioned Prime Minister Raila Odinga earlier this week to intervene in the MTR reduction stalemate, which has been delayed by a cost-study to be undertaken by the CCK.

Over the last 12 months to March this year, Safaricom has been losing its subscriber market share, while the new kid on the block, yuMobile has had the largest increase.

This trend has seen Safaricom subscribers drop to 65.3 percent from 68.2 percent and yuMobile gained to 8.7 percent up from 6.3 percent.

Despite the loss in the subscriber market share, the bulk of traffic remains with Safaricom at 77.3 percent, with 95.5 percent of this being on on-net calls.

Eric Musau of Standard Investment Bank Research said the recent move by Safaricom and Airtel to introduce new promotional tariffs is a sign of continued jostling for market dominance as sector players have failed to agree on a new MTR that was due to commence beginning July of this year.

“We however see the tactics being employed such as the use of promotions in place of permanent lower tariffs as falling short of aggressive, pointing to some interest in maintaining overall industry profitability,” he said.

Musau added that the recent tariffs schemes by the market’s two biggest players might put pressure on yuMobile and Orange to consider their own promotions if they see themselves as losing out on traffic, however he said Safaricom’s business remains robust and expects this to feature prominently in 2013 first half earnings.

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