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Decision on Mobile Termination Rate to wait longer

NAIROBI, Kenya, Oct 10 – The Communications Commission of Kenya (CCK) has said it is awaiting a report on the impact of the ensuing competition in the retail mobile voice market on government tax revenues and other market elements, before it decides on the controversial Mobile Termination Rate (MTR).

“Our decision shall be fair and in the wider interest of consumers and mobile telecoms industry, and without influence from any quarter,” CCK Director General Francis Wangusi said in a statement released on Wednesday.

The Kenya Institute for Public Policy Research Analysis (KIPPRA) which was contracted to undertake the study has submitted an inception report and is due to present the interim report to the CCK management and board soon.

The CCK started the regulation of interconnection in 1999 following the licensing of two additional mobile operators – namely Essar Telecoms Kenya and Orange Telecoms.

Safaricom and Telkom Orange have been on one side of the divide opposing a further reduction of the MTR currently at Sh2.21, while Airtel and yu mobile support a decrease in the rate to Sh1.44 that was to take effect in July this year, according to the glide path set by the CCK.

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

The actual retail off-net call prices fell from a high of Sh12 per minute in August 2010 to between Sh5 and Sh3 per minute currently.

In addition, on-net call retail tariffs dropped significantly from a high of Sh8 per minute to Sh3 per minute over the same period.

However, the local telco industry has been operating at a loss and not attracting much investment, with Safaricom being the only mobile operator to record profits last year.

There is concern that costs will increase on the money transfer side with the Ministry of Finance announcing new tax measures to raise over Sh40 billion needed to meet the recent wage adjustments in the public sector.

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This follows amendment of the Finance Bill 2012 by Parliament last Thursday which will now see an introduction of a 10 percent excise duty on mobile money transfers and any other fees charged by other financial institutions.

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