Lower calling rates in the offing

October 21, 2009

, NAIROBI, Kenya, Oct 21- A policy framework that would allow mobile operators with a small market share to pay lower interconnection charges for calls made to other networks is in the offing.

Zain Kenya Managing Director Rene Meza disclosed on Wednesday that Communication Commission of Kenya (CCK) was considering implementing the “Dominant Player Framework’ which would aid in bringing down the cross network tariffs.

“This framework would allow the regulator to set up a concept called ‘asymmetric interconnection’ where the mobile operator with the biggest market share will pay the highest interconnect calls while the smallest operator will pay the lowest charge thus allowing him to price his cross network charges much lower than any other operator,” he explained.

Mr Meza said discussions were ongoing to see whether the framework could be implemented before the end of the year.

Currently, the operators pay a standard fee of Sh4.27 for every cross network call which represents one of the biggest components of the cost structures of operators.

Although Mr Meza said the whole industry is aware of the proposal, the idea is not expected to go down well with Safaricom which controls about 78 percent of the market and which if implemented would mean that its customers pay more for their cross network calls than those on their competitors’ networks.

However, Mr Meza said the move was not discriminatory but was expected to level the field for all players.

“This is a universal concept which in a nutshell allows the mobile industry to achieve a fair playing field,” he said.

He argued that the pricing strategy of a big player like Safaricom would affect the performance and competitiveness of Zain, ‘Orange’ and ‘yu’.

“When you have a situation where the interconnect call is Sh4.27, you cannot offer Sh1 across all networks in Kenya. So the structure that we have is a function of the interconnect call regime that we have in the market,” he added.

On its part, CCK has indicated its intention of carrying out a study to review the current call structure.

At the same time, Mr Meza expressed confidence that the regulator will lower the licensing fee for 3G services which would facilitate the launch of the technology by Zain, Telkom Kenya and Essar Telecom Kenya formerly Econet Wireless.

Mr Meza said the Sh1.9 billion ($25million) as spectrum cost was too high and delayed their plans to introduce the technology in the market.

Safaricom has however already introduced the services.

“The $25million does not make business sense for three of the mobile operators in the market today. After discussions with the CCK, we concluded that the spectrum costs will be revised downwards to allow the operators to launch the services in the market,” he said.

CCK was however not immediately available to confirm by how much the cost would be lowered.

The MD also disclosed that Zain’s plans were still underway and that they have already procured the 3G technology equipment and had invested in excess of Sh5 billion in network improvement in readiness for the services launch by mid next year.

He spoke during the launch of a product dubbed “Talk, talk, talk” that will see their subscribers make free calls and SMS within the network depending on the amount of airtime they top up.

“Through the promotion which begins today (Wednesday), customers will be able to call and SMS up to three Zain numbers for free for a period of seven days,” he said of the offer that ends on December 31.

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