Price wars drive calling rates to lowest in Africa

Stiff competition in the mobile telephony market and an active industry regulator have reduced calling tariffs in Kenya to the lowest in Africa.

Statistics from individual telecommunication operators show that calls in Kenya average Sh3.5 per minute, compared to an average of Sh11 in the East Africa region.

In Kenya, Airtel and Essar Telecom, which trades as yu, charge Sh3 for calls across networks, while it costs Sh3 for on-net and Sh4 off-net calls when using the Safaricom network.

Telkom Kenya’s Orange charges Sh2 for on-net and Sh4 for off-net calls per minute.

Unprecedented levels

The industry regulator, the Communications Commission of Kenya, introduced new, low mobile termination rates in August last year, which precipitated the current price wars that have seen retail prices slashed to unprecedented levels.

A termination rate is the cost attached to terminating a call outside the originating network.

According to CCK, the termination rates will fall to Sh1.44 from July 1, and further to Sh1.15 on July 1, 2012.

Kenya’s calling costs compare favourably even with neighbouring Tanzania, which follows closely with its mobile phone operators Vodacom, Tigo and Airtel charging about Sh4 for on-net calls and Sh6 for off-net calls a minute.

But MTN, Airtel Uganda and Orange charge between Sh16 and Sh17 per minute for on-net calls and Sh18 for calls terminated outside the network, the highest rates in the East African region.

South Africa and Nigeria, two key markets with higher subscriber numbers, have higher calling rates compared to East Africa. There are also relatively high rates in Angola at Sh48 and Zambia averaging Sh28.

Safaricom chief executive officer Bob Collymore says CCK should keep the termination rates where they are for the market to stabilise after a series of price wars.

“We want conducive business environment for the telecoms industry. Low calling rates mean we will have to go slow on our expansion plans,” Mr Collymore said.

He wants the government to ensure healthy pricing in the industry and to attach strict rollout and coverage requirements to mobile licences.

His Airtel Kenya counterpart, Rene Meza, however, says the operator’s affordability model is driven by the need to address the economically disadvantaged and the middle class.

Mr Meza says 80 per cent of Kenya’s rural population remains unconnected, and rural mobile penetration remains one of Airtel’s primary objectives.

“This model has contributed to the acceleration of penetration and the recruitment of 2.5 million new mobile users in only six months between June and December 2010, as compared to the same number of customers added in the previous 14 months,” he said.

Telkom Kenya chief executive officer Mickael Ghossein said in a recent interview that his concern remains more long-term, particularly with the proposed next phase of revised interconnect charges.

“But we are optimistic of the regulator having sufficient time to make the right decisions before further review,” he said.