Kenya - Interconnection non-regulation

Kenya: Interconnectivity Charges Will Not Be Regulated

Hopes for a substantial drop in telephone bills have diminished with the regulator, Communications Commission of Kenya (CCK), saying it will not impose ceilings on the money operators charge each other to terminate calls.

The levies between mobile and fixed line service providers determine the cost of calls across networks and, in some cases, within a network when one service is used to prop up the other.

CCK director competition, tariffs and market analysis, Mr Charles Njoroge, said the operators should reduced the interconnection charges. However, he said the regulator would not insist on a maximum rate.

"CCK expects the operators to file with it the agreed prices, which should be lower than those agreed last year," Mr Njoroge said. That means the operators have to negotiate with each other on the charges.

During the first phase of interconnection cuts implemented last year CCK imposed a maximum interconnection rate of Sh30 across all networks.

Prior to a Telecommunication Networks Cost Study conducted in 2006, mobile charges across networks were as high as Sh50. The CCK director general, Mr John Waweru, said the cap had a great impact in the market.

"There were notable improvements in gross subscriber base additions , incoming and outgoing interconnect traffics and decreasing retail tariffs in the sector" said Mr Waweru.

According to the Safaricom chief executive officer, Mr Michael Joseph, the implementation of the second phase of the interconnection may not directly result to immediate tariff reduction on cross network calls.

Mr Joseph says an interconnectivity rate is just one component of what determines the tariff levied by mobile operators. Other factors include the tax levied by the government which stands at 27.6 per cent.

It is broken down into 16 per cent for Value Added Tax and 10 per cent in excise duty.

Safaricom's cheapest rate to other networks is Sh20 on its Super Taifa tariff for the first two minutes after which the charge reduces to Sh10 per minute. The average call time per subscriber is less than one minute. Safaricom does not levy the call set up fee.

Presently; Celtel charges Sh16 across all networks on its Uhuru Kwa Umoja tariff at all times. On Mambo Six it charges Sh6 across all networks between 11pm and 6 am.

Ms Claire Ruto, Celtel's corporate and regulatory director, says the company has already began implementing the second phase on interconnection.

However, there is a discernible trend in the market where operators keep the interconnection charges high in order to lock in their subscribers.

Celtel has, for instance, reduced the charges of the Pamoja tariff from Sh16 to Sh4 on calls made within its Network.

But there is a catch. The charge is limited to the four preferred Celtel numbers that the subscriber frequently calls. The subscribers, however, have to bare a call set-up fee of Sh2.50 on top of the first minute charge. This means a subscriber on pamoja tariff will be charged Sh6.40 in the first minute and thereafter four shillings.

Mr Waweru sees the tariff charges coming down under pressure from more players who have been licensed but are yet to roll out services.

One of them, Econet Wireless Kenya, has given a tentative date of end of July while Telkom Kenya which also paid Sh3.9 million for a GSM licence last year is yet to announce its when to rollout.

Mr Waweru says that with increased choice operators, rivals will need to become more customer oriented in order to retain old, and attract new, business.