• Saturday, 22 June 2024
Safaricom has agreed to pay Sh1.5 billion in tariffs.

Safaricom has agreed to pay Sh1.5 billion in tariffs.

Despite an agreement with rival mobile telcos to implement a smaller cut in Mobile Termination Rates (MTR) than previously ordered by the industry regulator, the Communications Authority of Kenya, Safaricom is expected to lose about Sh1.5 billion in revenue per year (CA).

MTRs are fees that a mobile service provider charges other telcos for terminating calls on its network.

Safaricom, Airtel, Telkom, and Jamii Telecommunications reached an agreement before the Communications and Multimedia Appeals Commission on Thursday to reduce the Fixed Termination Rate (FTR) from Sh0.99 to Sh0.58.

The new rate will be in effect for one year before the CA announces the substantive rate.

"The current MTR and FTR be reduced from Sh0.99 to Sh0.58 as an interim rate." "The revised interim rate will be in effect for a period of 12 months beginning August 1, 2022," according to the tribunal consent.

"Upon completion of the Network Cost Study, the authority will implement a new MTR and FTR without undue delay."

The new rate will be in effect for one year before the CA announces the substantive rate.

Based on Safaricom's average earnings of Sh3.5 billion under the Sh0.99 MTR and FTR rates, the new Sh0.58 rate will cost the telco nearly Sh1.5 billion in the fiscal year ending August 2023.

However, Airtel and Telkom, which were the biggest victims of the old rate, will save Sh1.4 billion and Sh190.5 million in MTR and FTR costs, respectively, over the course of the year.

The Ministry of Information and Communication Technology (ICT) has also taken up Safaricom's cause, accusing the telco of advocating for a system that penalizes competitors and pocketing more than seven times its fair share of MTR and FTR rates.

Airtel, Telkom, and Jamii telecommunications argued that lowering the rates would make voice services more affordable and accessible to Kenyans.

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