President prompts political row after suspending MTR cut

29 Aug 2012

Kenyan president Mwai Kibaki has intervened for the second time in as many years to prevent the Communications Commission of Kenya (CCK) from lowering the existing mobile termination rate (MTR), Business Daily Africa reports. Kibaki, who the website reports is acting at the behest of mobile market leader Safaricom and state-owned Telkom Kenya (Orange), issued the directive in a letter to Bitange Ndemo, the Permanent Secretary for the Ministry of Information and Communications. In May the CCK ordered the country’s four mobile operators, also including Essar Telekom Kenya and Airtel Kenya, to cut termination rates from KES2.20 (USD0.026) to KES1.60 per minute from 30 June this year, only for political meddling to derail the plan. The news has emerged after a letter signed by Nick Wanjohi, the President’s private secretary, was leaked to the media. Business Daily quotes the correspondence as saying: ‘This office has received communication, dated 11 July 2012, from your minister authorising the acting director-general of CCK to effect the new MTR before conducting a study that will bring this matter to rest. I am directed, therefore, to inform you that until an all-inclusive study of costs and other relevant issues is undertaken and forwarded to this office for His Excellency’s consideration, the status quo should remain’.

For his part, Telkom CEO Mickael Ghossein commented: ‘Lower tariffs are good for consumers, but the truth of the matter is that we are not making any money. Some operators are out to kill this industry by offering free calls. They have now forced us to go that way. He added that, even with the current MTRs in place, the operators’ margins are way below the recommended 30%-40%, leaving them struggling to absorb the heavy capital and operational expenses required to run their respective businesses and generate a profit.