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Safaricom boost as Ethiopia slashes termination charges

Safaricom’s subsidiary in Ethiopia has been handed a boost after the country’s telecommunications regulator cut mobile termination rates (MTR) by a quarter, making it less costly to connect its customers calls with those of its rival Ethio Telecom.

The Ethiopian Communications Authority (ECA) has cut the rate to 0.23 Ethiopian Birr (Sh0.54) per minute from ETB0.31 (Sh0.72) per minute, translating to a 25.8 percent reduction. The rates become effective on May 1 and run until the end of April next year when a further cut will be made.

The cut comes after the regulator carried out a cost study, which it said was aimed at establishing a “level playing field” and creating an environment where the two operators— Ethio Telecom and Safaricom Telecommunications Ethiopia Plc– can compete fairly. Kenya’s Safaricom owns 51.67 percent in Safaricom Telecommunications Ethiopia Plc, making it its subsidiary.

“In essence the intention is to promote competition among operators, prevent anti-competitive behavior, 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 a critical service that enables customers of one mobile network to connect with those on another network. Without termination services, communications would be restricted to within the same network, limiting the reach of mobile services.

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 have, however, been bad news for Safaricom which has over 66 percent 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 boost 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 launched commercial operations in Ethiopia in October 2022, hopes to win more clients with its voice, SMS and mobile money products and take its revenue past the Sh4.8 billion revenue it booked in the nine-month period, out of which Sh678 million was from voice.

Safaricom’s Ethiopia unit closed December last year with 2,242 base stations, including 1,252 it built, covering 33 cities.

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