Mobile call rates may fall as govt plans to slash interconnect fees

02Dec 2017
The Guardian Reporter
The Guardian
Mobile call rates may fall as govt plans to slash interconnect fees
  • It's good news for mobile phone users, but telecom firms could likely see a drop in future revenues and profits

THE government's telecom regulator wants mobile phone operators in the country to cut fees they charge each other to connect calls by over 90 percent in the next five years, a move that will benefit consumers with cheaper phone calls, but could potentially hurt profits and revenues of telecom compan

According to a public notice issued yesterday by the state-run Tanzania Communcations Regulatory Authority (TCRA), mobile termination rates (MTR) – the charges one network pays another to end a call on its network – will be gradually slashed over the next five years starting with 1 January 2018.

Under TCRA's proposal, interconnection rates will fall from the current 26.96 shillings per minute to 15.6 shillings per minute from next month. 

The current rate has been in force since January 2017 and will expire at the end of this month.

The reduction of MTRs will likely lead to a reduction in mobile phone call rates and provide a much-welcomed New Year's Day present to tens of millions of Tanzanians who currently use mobile phones.

The regulator proposed gradual cuts in interconnection rates over a five-year period to 10.4 shillings (2019), 5.2 shillings (2020), 2.6 shillings (2021) and 2 shillings (2022).

This will represent a decline of interconnection rates of over 92.5 per cent between now and the next five years. 

TCRA Director General James Kilaba said in the notice that the regulator has launched a consultation process and urged mobile phone operators and other stakeholders to "make well reasoned written submissions ... in relation to the proposed interconnection rates."

Latest data from TCRA show that the number of mobile phone subscribers in Tanzania increased to 40.35 million by June this year from 39.99 million in May.

The biggest mobile phone operators by market share are Vodacom (12.61 million subscribers), Tigo (11.37 million), Airtel (10.34 million), Halotel (3.8 million), Zantel (0.98 million), Smart (0.82 million) and TTCL (0.41 million). 

Although TCRA has proposed deep cuts to interconnection rates over the next five years, the rates were cut less drastically between 2013 when they were 34.92 shillings per minute to this year, when the rate was slashed to 26.96 shillings per minute.

Representatives of mobile phone operators could not be immediately contacted for comment, but some telecom analysts said the big 4 players -- Vodacom, Tigo, Airtel and Halotel -- could be hit hard by the proposal.

Mobile phone operators in the country have been forced to engage in price wars over the years to compete for market share, which has resulted in cheaper phone call and internet charges to consumers.

Analysts said lower interconnection rates will likely benefit smaller players in the mobile phone industry, such as Smart, Zantel and TTCL because it will be cheaper to make cross-network mobile phone calls.

Lower termination rates will theoretically give smaller mobile phone companies an opportunity to lower their prices, thus enabling them to attract more subscribers.

Latest TCRA statistics show that Vodacom has 38 percent of on net traffic shares, followed by Tigo (29 per cent), Airtel (24 per cent) and Halotel (6 per cent).

In off net traffic shares, Airtel leads with 32 per cent of the shares, followed by Tigo (27 per cent), Vodacom (23 per cent) and Halotel (15 per cent).

The term 'on-net' is used to refer to a mobile phone call within the same network, while 'off-net- refers to calls between different mobile phone operators.

TCRA also plans to launch the first ever auction of mobile spectrum next year as part of plans to boost government revenues from the fast-growing sector. 

The telecom regulator said it was now working on the final rules for the maiden auction, which is scheduled to take place in May 2018.

"Following the successful migration from analogue to digital television, spectrum in the 700 MHz (megahertz) frequency range, which was previously being used for analogue television broadcasting, has now been released and is now available to be assigned for mobile broadband services," TCRA said. 

"TCRA hereby notifies the general public and stakeholders that it intends to assign the spectrum in the 700 MHz band through an auction, subject to a reserve price."

The telecoms watchdog did not reveal its reserve price for the upcoming auction, but telecoms industry sources said the government could potentially earn hundreds of billions of shillings from the sale.

In comparison, the Australian Communications and Media Authority (ACMA) auctioned a 700 MHz band spectrum in April this year and raised $1.55 billion (around 3.5 trillion shillings) revenues despite a reserve price of around $857 million.

Spectrum auctions are increasingly been seen as a step toward market-based spectrum management and privatisation of public airwaves and are a way for governments to allocate scarce airwaves.