Safaricom's Ethiopia Subsidiary Benefits from 25% Cut in Mobile Termination Rates

The Ethiopian Communications Authority (ECA) has reduced mobile termination rates (MTR) in Ethiopia by 25.8%, effective May 1, 2023. The rates have been lowered from ETB0.31 (Sh0.72) per minute to ETB0.23 (Sh0.54) per minute. This move aims to promote competition and ensure fairness between operators, including Safaricom's subsidiary, Safaricom Telecommunications Ethiopia Plc, and the incumbent Ethio Telecom.

The rate reduction is based on a cost study conducted by the regulator and is intended to establish a 'level playing field' where the two operators can compete. The new MTR will be in effect until April 2025, after which the regulator will review the rates again. This reduction in termination rates will help Safaricom's subsidiary in Ethiopia reduce costs for connecting calls with Ethio Telecom and potentially attract more customers with its suite of services, including voice, SMS, and mobile money.

Why this matters: The cut in mobile termination rates in Ethiopia is a significant development for Safaricom's subsidiary, as it will lower costs and enhance its competitiveness against the dominant player, Ethio Telecom. This regulatory support sets the stage for Safaricom Telecommunications Ethiopia Plc to expand its market share and establish a robust presence in the region.

The rate cut comes at an opportune time for Safaricom's Ethiopia venture, which has onboarded 9 million customers in the nine months leading to December 2022, compared to Ethio Telecom's 74.6 million subscribers. Supported by 2,242 base stations, including 1,252 built by Safaricom, the subsidiary is strategically positioned to capitalize on Ethiopia's evolving telecommunications landscape.

The ECA's decision to reduce MTR is similar to the recent reduction in Kenya, where the rate fell to Sh0.41 per minute from Sh0.58 per minute in March 2024. The move is expected to lower phone bills for Ethiopians, foster competition, and benefit consumers by offering them more choices and competitive prices.

Key Takeaways

• ECA reduces mobile termination rates in Ethiopia by 25.8% to ETB0.23/min.
• Rate cut aims to promote competition between Safaricom and Ethio Telecom.
• Safaricom's Ethiopia subsidiary can now reduce costs and attract more customers.
• Similar rate cut in Kenya lowered phone bills and fostered competition.
• New MTR effective until April 2025, when ECA will review the rates again.