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Boost for Safaricom as Ethiopia telecom regulator slashes termination rates

A Safaricom Ethiopia shop in Addis Ababa, Ethiopia, July 29, 2022. (Photo: Reuters)

By Barack Oduor | 20 Apr 2024

The idea to make the cut came after the regulator conducted a cost study aimed at ensuring there is fairness for the two operators.

Kenya's biggest telecom company, Safaricom is making strides in Ethiopia after the country's telecommunications regulator decided to cut mobile termination rates (MTR) by a quarter, making it less costly to connect its customers' calls with those of its rival Ethio Telecom.

MTRs are the costs that operators charge each other to allow customers to communicate across networks.

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The regulator, the Ethiopian Communications Authority (ECA), decided to cut the rate to 0.23 Ethiopian Birr (Sh0.54) per minute from ETB0.31 (Sh0.72) per minute, translating to a 25.8 per cent reduction. The new rates as effected by the telco regulator will become effective from next month until the end of April next year when a further cut will be made.

The idea to make the cut came after the regulator conducted a cost study aimed at ensuring there is fairness for the two operators— Ethio Telecom and Safaricom Telecommunications Ethiopia Plc.

Currently, Safaricom owns 51.67 per cent of Safaricom Telecommunications Ethiopia Plc, making it its subsidiary.

"In essence, the intention is to promote competition among operators, prevent anti-competitive behaviour, and encourage a market structure that benefits consumers by offering them a variety of choices and competitive prices," said Balcha Reba, director general at ECA.

Call termination on mobile networks is an important service that allows customers of one mobile network to connect with those on another network. When termination services are not there, communications would be restricted to within the same network, limiting the reach of mobile services.

The new development means that the Ethiopia MTR is now close to that of Kenya, which in March 2024 fell to Sh0.41 per minute from Sh0.58, marking the latest cut. The series of MTR cuts in Kenya has, however, been not favourable for Safaricom which has over 66 per cent of subscribers. The telco for instance lost about Sh2 billion in the financial year ended March 2023 after the rate was cut to Sh0.58 from Sh0.99.

The cut in MTR in Ethiopia is a major business score to Safaricom whose subsidiary had in nine months to end of December last year on-boarded nine million customers against the 74.6 million subscribers that Ethio Telecom closed last year with.

Safaricom, which began operations in Ethiopia in October 2022, dreams of wooing more clients with its voice, SMS and mobile money products and taking its revenue past the Sh4.8 billion revenue it booked in the nine months, out of which Sh678 million was from voice.