CA says Safaricom shifting goalpost in call rate cut row

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CA says Safaricom shifting goalpost in call rate cut row


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The Communications Authority of Kenya headquarters in Nairobi. PHOTO PHOTO | NMG

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Summary

  • The leading telco says it prefers the Long Run Incremental Cost (LRIC) model in determining the rates, claiming the regulator’s use of a benchmark methodology ignores the cost of facilitating calls across rival networks.
  • In submissions filed to the Communications and Multimedia Appeals Tribunal, the regulator says Safaricom had previously opposed the cost model and had in 2011 asked for the suspension of the gradual reduction in MTR for two years.
  • The fight over the contested MTR cut has divided players in the telecommunications sector based on who stands to lose or benefit from the decision.

The Communications Authority of Kenya has accused Safaricom #ticker: SCOM of shifting goalposts by preferring a method it previously opposed in its efforts to stop the proposed reduction of mobile termination rates (MTR).

The regulator announced it will cut the MTR per minute to Sh0.12 from Sh0.99 at the start of this year but the decision was temporarily suspended after Safaricom filed an objection at the tribunal.

The leading telco says it prefers the Long Run Incremental Cost (LRIC) model in determining the rates, claiming the regulator’s use of a benchmark methodology ignores the cost of facilitating calls across rival networks.

In submissions filed to the Communications and Multimedia Appeals Tribunal, the regulator says Safaricom had previously opposed the cost model and had in 2011 asked for the suspension of the gradual reduction in MTR for two years.

“The appellant (Safaricom)’s legitimate expectation is inconsistent with its past conduct in opposition to the LRIC methodology, which it now prefers,” CA said through lawyer Wambua Kilonzo.

“On May 18, 2011, the appellant wrote to the respondent (CA) stating that it had been ‘consistent in its discomfort with the pure LRIC methodology’ and requested the respondent to suspend further implementation of the glide path in determination No. 2 of 2010 for two years. ”

The regulator added that it would thus be contradictory for Safaricom to claim as it does, that it had a legitimate expectation based on matters or issues to which it has demonstrably been opposed to.

The telco says the rates proposed by CA do not reflect economic reality. The regulator on the other hand holds the rates are viable, citing Safaricom’s promotions in which it charges calling rates as low as Sh0.2 per minute.

The fight over the contested MTR cut has divided players in the telecommunications sector based on who stands to lose or benefit from the decision.

The Ministry of ICT recently told Parliament that Safaricom rakes in an estimated net gain of Sh883 million out of the Sh1 billion that is paid out quarterly amongst the telecommunication firms, making it the only and biggest beneficiary of interconnection charges.

This amounts to Sh3.5 billion annually, with its rivals Airtel Kenya and Telkom remaining in net losing positions. Safaricom’s rivals are in support of the proposed MTR cuts, backing the CA’s argument that players should not make a profit from the charges.

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