Safaricom to remain unscathed despite lower MTR

Barely a week since Kenya’s telecommunications industry regulator lowered the mobile termination rates (MTR), sources from Safaricom reveal that the telco’s top executives are betting that other network providers are unlikely to be able reduce voice call charges and still remain profitable.

A trusted executive told HumanIPO that Safaricom would almost remain unscathed by the CCK’s move given the problems its competitors are currently facing, with barely any of them making ends meet on their balance sheet.

Other telecoms owe Safaricom in excess of KSh700 million (approx $815,000) in payment with Safaricom owing them just KSh200 million (approx. $235,000) in return, according to the source.

These revelations confirm HumanIPO’s earlier suggestion that Safaricom seemed to have already won the price wars on the voice tariff front.

Safaricom CEO Bob Collymore is on record as having said that the MTR’s recommended glide path was not sustainable with the industry remaining profitable.

He regretted that some areas of country remained fully unconnected to any network and the reduction in MTR would just pour cold water on hopes of any investment in commercially unviable areas.

He has also on many occasions said that the capital-intensive sector was not attracting as much investment as hoped, with investors still watching from a distance.

A thorough look at the last CCK quarterly statistics confirms the reasons for Safaricom’s confidence. Out of voice traffic of five billion minutes between April and June this year, just about 245 million minutes on the Safaricom network were off-net. Apart from Safaricom and Essar, all other networks registered more calls off-net that on-net.

The situation at Airtel, the second largest company by market share, is that calls off-net were almost double those on its network, with only 279 million minutes registered on-net out of a total of 710 million minutes.

Over the same period, over 60 percent of calls originating from Orange were off-net, confirming the fears of many Kenyans that the MTR reduction is perhaps a little too long overdue and will have little significance.

Posted in: Telecoms

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