CCK New Rates, Zain Late Night Calls and Safaricom’s Long Arm

CCK announced new rates after a report by a study group it commisioned found out that the interconnection rates were way too high. CCK immediately announced the following rates;

MOBILE TERMINATION RATES
	EXISTING	2010 CHANGE	2011 CHANGE
	4.42	2.21	1.44
PERCENTAGE CHANGE		50%	35%

LOCAL TERMINATION RATES
	EXISTING	2010 CHANGE	2011 CHANGE
	1.67	1.67	1.33
PERCENTAGE CHANGE		44%	20%
SINGLE TANDEM EXCHANGE	3.01

Zain Kenya immediately announced a 50% reduction in the rates and went full swing into accepting new clients. Zain might have or might have not envisanged a scramble for its services and Safaricom CEO, Michael Joseph was openly crying foul. Immediately Zain announced the new rates, Zain to Safaricom calls started not going through. Zain engineers with their counterparts at Safaricom tries to resolve this as they still use the Celtel / Safaricom interconnection agreement of 2005.

The issue doesn’t get resolved and so on the 18th February, 10 pm, Safaricom CEO receives a call from Rene Meza who is the Zain CEO. Zain CEO calls to complain that he feels that Safaricom is punishing it for the new rates it has published. MJ rubishes the claims and promises to look into it. That promise falls on deaf  ears as Rene Meza runs to the regulator, CCK, and the media immediately claiming sabotage. CCK promises to look into it.

Michael Joseph gets calls from all media people asking what is happening and he tells its side of the story. The story becomes too juicy for the media and they all go gaga with it. The story occupies all Thursday day TV and Friday newspapers and blogs.

On Friday, Minister Poghisio calls the two CEOs for a dressing down telling them categorically that the war of words will lead to the distortion of the market and that all operators must desist from fighting through the media. The two CEOs are asked to reconcile. They do but with much hesitation.

Zain sees no point in continuing to depend on Safaricom’s pipe and so they are building their own now.

Meanwhile Safaricom is conceding that the move to lower rates by Zain and Yu will affect them and they are going to respond soon. High level meetings were held between the Advertising, Marketing and Communication departments at Safaricom and we might see a response by Monday from Safaricom. My source at Safaricom also tells me that Safaricom is now not looking at margins in the offnet calls but volume to boost its revenue. The more people call other networks from Safaricom, the better, according to Safaricom.

But senior manager at Safaricom tell me that they still believe that data and M-Pesa will still be very profitable for Safaricom for sometime.