When the communications industry regulator announced a cut on the rate mobile phone operators charge each other for calls made across networks, public expectations hit fever-pitch.
The stakes were high. Kenyan consumers braced for a fall in cross-network charges in the wake of a price war triggered by lowered mobile termination rates (MTRs).
Small operators like Airtel and Telkom Kenya eyed a windfall in the price war as Safaricom faced another threat to its business.
True to the outlook, the Communications Authority of Kenya (CA) slashed the MTRs from Sh4.42 per minute to Sh2.21, triggering a price war to the delight of consumers.
By December 2010, average call tariffs to rival networks had fallen to Sh3.47 from Sh7 a year earlier.
Fast forward to February 2026, and the regulators made another move to lower termination charges amid little enthusiasm.
It reduced MTR to Sh0.37 per minute from Sh0.41 per minute, a measly drop that has had zero impact on the cost of cross-network calls.
Analysts say the era in which the MTR would influence a cut in call tariffs is over.
“The cut in MTR is only Sh0.04, which is barely two percent of the retail rate for an operator such as Airtel. So, it’s not a big enough change to make any impact on the consumer rate,” observes sector analyst Ben Roberts.
The muted market reaction reflects how severely the role of termination rates has diminished, with the charge now accounting for only a small fraction of the final retail price of a call.
Changes in MTRs are increasingly absorbed within operator margins and cost structures, making them more of an internal accounting adjustment than a visible driver of consumer pricing.
However, for the telco operators, termination rates remain financially significant, shaping interconnection payments between networks, particularly where traffic imbalances persist between larger and smaller operators.
Average call charges on Safaricom stood at Sh4 a minute in September last year, while Airtel Kenya had its tariff pegged at Sh2.93.
This is markedly different from the market structure at the start of 2010, when the average call charges to rival networks across the industry stood at Sh7.
The MTR now primarily influence how revenues are shared within the industry rather than how much subscribers pay, marking a transition from a consumer pricing determinant to a back-end competitive tool.
For minority operators such as Airtel Kenya and Telkom Kenya, lower termination rates reduce the cost of off-net calls where outbound traffic to larger networks exceeds inbound traffic from those networks.
That traffic imbalance has historically meant smaller operators paid out more in termination fees than they received, a dynamic they argued constrained their ability to compete on equal footing.
The share of cross-network calls in the industry has increased from 3.8 percent in 2010 to 16.3 percent of all voice traffic last September amid the narrowing of charges for calls within the network and those head to rivals.
In its latest determination issued last month, the CA set out a four-year glide path beginning March 1 to progressively reduce MTRs and Fixed Termination Rates (FTRs) in a series of cuts that will see the rate decline to Sh0.30 by March 2029.
The decision followed the expiry of the Sh0.41 per minute rate that took effect in March 2024 after a negotiated settlement between the regulator and industry players following prolonged legal contestation over the appropriate level.
MTRs and FTRs are wholesale charges paid by one operator to another for terminating calls on its network whenever a subscriber makes an off-net call across competing telecommunications systems.
The fight over termination pricing began in 2010 when the rate stood at Sh4.42 per minute, prompting minority operators to accuse the prevailing structure of entrenching Safaricom’s market dominance through asymmetric wholesale settlements.
The CA responded that year by cutting the rate to Sh2.21, then to Sh1.44 in 2011 and further to Sh1.15 in 2012 as pressure mounted to make the interconnection regime more reflective of underlying costs.
An extra reduction to Sh0.99 in 2015 was followed by a six-year freeze during which the rate remained unchanged despite dramatic shifts in subscriber numbers, technology upgrades and the revenue composition of the telecommunications industry.
By the time the regulator commissioned a comprehensive telecommunications network cost study in 2022, industry players had entrenched sharply divergent positions on what constituted fair and economically sustainable termination pricing.
The cost study concluded that prevailing termination rates were significantly above the efficient cost of delivering call termination services and recommended a phased glide path toward substantially lower levels aligned with international benchmarks.
The initial proposal to cut the rate to Sh0.12 per minute triggered a legal challenge from Safaricom at the Communications and Multimedia Appeals Tribunal, where the operator argued that the proposed level ignored macroeconomic realities.
Safaricom cited factors such as inflation, foreign exchange volatility, cost of capital and asset depreciation in contending that an abrupt reduction would undermine investment incentives and distort the financial equilibrium of the sector.
An interim compromise pegged the rate at Sh0.58 before the regulator eventually settled on Sh0.41 per minute effective March 1, 2024, for two years pending a fresh determination.
In its annual report for the year ended March 2025, Safaricom disclosed that the Sh0.41 rate reduced its service revenue by Sh1.6 billion, illustrating the magnitude of interconnection income at stake.
“One key change impacting our performance during the year was the CA’s reduction of mobile termination rates and fixed termination rates to Sh0.41 per minute, effective March 1, 2024. This impacted our service revenue by Sh1.6 billion,” said Safaricom in the report.
The reduction of wholesale termination charges does not obligate operators to adjust their retail voice tariffs downward, leaving pricing decisions within the realm of commercial strategy rather than regulatory compulsion.
Operators may, therefore, absorb savings from lower interconnection charges to offset other rising costs rather than pass them directly through to retail call prices.
Energy expenses for base stations, spectrum licence fees, imported network equipment priced in foreign currency and capital expenditure on 4G and 5G upgrades all exert upward pressure on operating budgets.
In the environment, termination rate reductions can serve as a margin stabiliser rather than a trigger for price competition, particularly in a market where voice growth has plateaued.
Industry data over the past decade shows that voice revenue growth has slowed relative to mobile data and digital financial services, which now account for a larger share of operator income streams.
Mobile money platforms and broadband subscriptions have emerged as strategic growth drivers, reducing the centrality of per-minute voice tariffs to competitive positioning.
The CA maintains that cost-oriented termination pricing promotes efficiency, non-discriminatory access and fair competition by preventing interconnection fees from acting as barriers to entry.
At the same time, the regulator has emphasised the need to balance consumer welfare with the protection of investment incentives, arguing that abrupt reductions could undermine network expansion efforts.
“Interconnection is an essential component of telecommunication regulation as its pricing and access framework can be used as a barrier to entry and expansion, thereby impeding competition,” wrote CA in the determination.
“Moreover, high interconnection rates are associated with high retail tariffs, which negatively impact the affordability of ICT services and reduce consumer welfare.”
Internationally, several jurisdictions have moved toward near-zero termination regimes or bill-and-keep frameworks where operators do not charge one another for call termination.
Kenya’s four-year glide path signals gradual alignment with that global trajectory while attempting to avoid sudden financial disruptions for operators heavily reliant on inbound traffic revenues.
For Safaricom, which commands the largest subscriber base in Kenya, lower termination rates compress a revenue stream that has historically benefited from its scale advantage.
Inversely, for other smaller players, reduced MTRs narrow the wholesale settlement gap but without automatically neutralising other structural factors such as brand dominance.
