Safaricom boss downplays price control threat

October 3, 2009

, NAIROBI, Kenya, Oct 3 – Safaricom Chief Executive Officer (CEO) Michael Joseph has downplayed threats by the government to regulate internet connectivity prices if operators failed to reduce them in the next few weeks.

Mr Joseph told Capital Business that despite the operationalisation of two under sea fibre optic cables, many Internet Service Providers were still relying on the expensive satellite bandwidth for back up, which they cannot cut abruptly.

“We as private corporations have to base our pricing on costs. Since the advent of SEACOM and now TEAMS, our costs have not gone down one iota. In fact they have gone up because we have not released any of the existing capacity because we need it,” he said.

Two weeks ago, Information Permanent Secretary Dr Bitange Ndemo said the Communication Commission of Kenya (CCK) would control the rates if the telecommunications firms would not have reduced them to reasonable levels by the end of October.

“They are being mischievous. If competition doesn’t push down the prices the regulator will step in,” the PS has said.

The government wants one Megabyte of bandwidth to be sold at about Sh15, 000 ($200) which is lower than the Sh45, 000 ($600) that it’s currently going for.

Mr Joseph however said these firms have an obligation to their shareholders and therefore cannot offer their services at a loss.

“We have an obligation to make money and offer a return to our shareholders. Safaricom is a listed company with 840,000 Kenyans as our shareholders and we cannot sell something below cost because someone in authority says we must,” the CEO said.

Mr Joseph however said that the costs would eventually come down as the connections on the cables are guaranteed.

“We would be silly to have all this capacity that we have paid heavily for and not sell it. If we are selling it at a high price and nobody wants to buy it because it’s too expensive then we would look very silly so of course we must bring the costs down,” he said although he was non-committal on when this could happen.

He however welcomed the announcement by the CCK that it would conduct a study to review the interconnection rates, which would bring down the calling rates.

Currently the interconnect rate (that each operator charges the other for calls made on their network) is about Sh4 but Mr Joseph said this must be based on costs.

“We are willing to bring down that cost but it must be done in a proper manner. You can’t arbitrarily say its Sh4 now tomorrow it will be Sh2,” he said adding that any move that is made must be done cautiously to ensure it does not affect the vibrancy in the telecommunication sector.

Meanwhile, Mr Joseph said Safaricom has started the exercise to have its new and existing subscribers register their SIM (Subscriber Identity Module) cards in compliance with the government’s directive.

This follows the development of guidelines by the CCK that will provide a framework for implementing the SIM ownership information for all users.

In a paid up advertisement in the local dailies on Thursday the regulator said the requirement applies to all nationals, foreigners as well statutory bodies.

Subscribers will be required to provide their phone number, name, date of birth, gender, postal address alternative telephone contacts and details of their ID cards.

This requirement is one way of trying to curb the rise in crime and insecurity in the country that is being carried out via the use of mobile phones.

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