Communication, Information And Innovation Committee Discuss The Pros And Cons Of Reducing The Mobile Termination Rates
Chair of the committee and Dagoretti South MP John Kiarie
By: John Kariuki
The Committee on Communication Information and Innovation that is Chaired by John Kiarie (Dagoretti South), on Wednesday held a meeting on the inquiry into the review of Mobile Termination Rates by the Communication Authority, with officials from the Kenya Revenue Authority and the Competition Authority of Kenya.
The Kenya Revenue Authority (KRA) Commissioner for Domestic Taxes Ms. Rispah Simiyu, noted that reduction in the current Mobile Termination Rates (MTRs) and Fixed Termination Rates (FTRs), of Kshs. 0.58 to the proposed new rate of Kshs. 0.12, will impact on VAT, Excise and Corporation Tax remittances.
“Safaricom’s market share is 65.6 percent and based on the approximate Call Termination Revenue per year of Kshs. 5.1 billion per year, the expected revenue loss if this is effected will be Kshs. 4.04 billion.” Noted Ms. Simiyu.
Ms. Simiyu however noted that since Telkom and Airtel pay Safaricom for mobile termination, this move will give them greater price flexibility hence offering effective competition and boosting their revenue given the reduction in costs.
The Government on the other hand, which has a 35 percent shareholding in Safaricom, will suffer a reduction in revenues as a result of this reduction in termination rates, leading to a reduction in dividend payout to the Government.
The Acting Director-General of the Competition Authority of Kenya Mr. Adano Roba, also appeared before the committee and supported the move to lower the termination rates, noting that it will reduce barriers to enter the market; which will prevent abuse of dominance, narrow differences between on-net and off-net prices, increase customer choice, reduce cost of doing business, increase voice traffic and operator revenue, thus increasing Government tax revenues.
“This will ultimately generate efficiency in the telecommunications sector for the benefit of Kenyan consumers.” Stated Mr. Roba.
He further cited a study conducted by the Communications Authority, which expounded on the need to implement low termination rates as has been the trend worldwide in the sector, with some jurisdictions like Canada and India implementing zero rates, and also the need for symmetric termination rates between large and small operators.
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