Issue Seven - Conversations on Technology, Business and Society

NEWS
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TOP STORIES THIS MONTH
Uganda faces telecom price war as
Kenya, Tz, Rwanda cut call rates
SOURCE: ALLAFRICA.COM
Kenya has made drastic cuts in mobile
telephone call tariffs, posing a huge
challenge to her Great Lakes regional
counterparts on how to cope with the
competitiveness in the sector following the
launch of the East African Common Market.
Kenyans have been calling at an equivalent of
UShs300 on average per minute across all networks,
with Uganda charging Ushs 340. But the price
difference has changed dramatically following the
latest decision by Kenya’s telecom regulator, the
Communications Commission of Kenya (CCK), to halve
the interconnection tariffs– the rate telecom firms
charge one another for cross-network calls.
Kenyans now call for an equivalent of about Ushs75
per minute across all networks. In Rwanda, the uniform
call rate is Rwf90 (about Ushs 270) per minute, while it is
Tshs 5 (about Ushs 7.5) per second in Tanzania. This is
still lower than Ushs9 per second charged by MTN per
second in Uganda.
Uganda’s telecom regulator, Uganda
Communications Commission’s (UCC) attempts to fix
uniform interconnection tariffs at UShs131 last year
immediately attracted litigation between UCC and
telecom market leader MTN Uganda. MTN sued UCC
insisting that the Ushs131 per minute was way below
the realistic interconnection rate. According to MTN, the
realistic tariff should not go below Shs151.
The UCC’s plan to enforce the uniform
interconnection rate ceilings, which were slated to come
into force on January 1, 2010, had been halted by court
upon application by MTN Uganda.
The case was later withdrawn to allow further
consultations between UCC and the stakeholders in the
telecom sector.
Last week, UCC issued a statement indicating that the
new interconnection rate is already operational.
“Following the conclusion of the consultations, the
Commission hereby notifies the public that the above
interconnection rates shall be applied as default/
reference interconnection rates and will take effect from
July 6, 2010,” the UCC statement reads in part.It’s not
clear whether MTN consented to the tariff which they
had initially opposed. Attempts to contact MTN did not
yield much as officials were cagey about the issue.
However, even at the Shs131 interconnection rate per
minute, telephone calls on Uganda’s telecom network
would still be much higher than in Kenya.
Following the halving of the interconnection tariff
in Kenya to Kshs 2.1 (about Ushs50), Zain Kenya also
slashed its call rates by 50%, offering its customers a
competitive rate of Kshs 3 (about Ushs75) per minute to
call across all networks.
Safaricom, which controls about 80% of Kenya’s
telecom market, also swiftly responded by bringing
its call rates down from Kshs 12 (Ushs 300) across all
networks to Kshs 3 (Ushs 75), with intra-calls on the
same network costing less at Kshs2 (Ushs50) per minute,
contrary to the Kshs8 (Ushs 200) previously.
The CCK’s target was to open up the market to
competition and break up the ‘club effect’ established
WARID Telecom Headquarters in Kampala. Their
package, PAKALAST has caused almost everyone to
buy a Warid SimCard
by Safaricom. Since most of the mobile telephone
customers are on the Safaricom network, the telecom
giant has been offering preferential rates to call within
its network and higher rates for calling other networks.
The target was to discourage calls to other networks
and attract more customers from the competitors,
whose services then would look expensive.
MTN Uganda is operating a similar model. Because
it controls about 60 per cent of the market share, its
customers cannot easily switch to other networks. If they
did that, they would pay higher charges per call since
most of the people they would be calling are on MTN
network.
Therefore the uniform interconnection rate would
encourage subscribers of other networks not to
crossover to MTN since the charges would be uniform.
As the interconnection fees stayed high, the telecom
companies started promotional campaigns to enable
their respective customers call within their networks at
huge discount rates, but still charged higher rates for
calls across other competitors’ networks.
For Ushs500, for example, Zain customers in Uganda
get 25 minutes calling time over 24 hours within the
same network under the Kika promotion. If they pay
Ushs2000 to enter the Unlimited promotion, they get 83
minutes of call time between 6am and 6pm within the
same network.
Warid and Uganda Telecom also have introduced
similar arrangements for calling within their networks.
For Orange Telecom, customers can load airtime,
Continued on Page 13
PC TECH | SEPTEMBER - OCTOBER 2010 | pctechmagazine.com