07 May 2024

The Ethiopian Communications Authority (ECA) has set price caps on mobile and fixed termination rates for the next five years in a bid to foster better competition in the country’s telecoms sector.

The move is rooted in a 2022 interconnection agreement between state-owned incumbent telco Ethio Telecom and Safaricom Ethiopia, which was mediated by ECA. Under that agreement, the ECA set mobile and fixed termination rates at ETB 0.31 per minute, with the understanding that it would revise the rates after it completed a cost study to set the rates based on actual cost of termination.

The ECA has now completed the cost study, using data contributed by Ethio Telecom and Safaricom, and has reset the terminations rates at ETB 0.23 per minute for mobile, ETB 0.15 for fixed-line and ETB 0.05 per SMS. The rates took effect on 1 May and will gradually decline over the next five years to 2029 to ETB 0.19, ETB 0.12 and ETB 0.04, respectively.

The ECA emphasised that the new termination rates are a price cap, therefore, all mobile and fixed telecommunications operators have the freedom to negotiate interconnection rates that are lower. The ECA has implemented a top-down fully allocated cost (TD-FAC) model to calculate the rates, as this relies primarily on financial and accounting information that should be readily available.

The move to set termination rates was justified by a separate market review by ECA to examine competition dynamics in the telecoms sector and propose pro-competitive remedies where necessary. That study concluded that Ethio Telecom has significant market power (SMP) in various wholesale markets, prompting the proposal of remedies such as price controls, mandatory agreements filing, and non-discrimination obligations.

The objective of implementing cost-based termination rates is to establish a level playing field for telecoms players.

“By ensuring that rates are set based on the costs of providing services… the intention is to promote competition among operators, prevent anti-competitive behaviour, and encourage a market structure that benefits consumers by offering them a variety of choices and competitive prices,” said ECA in the report.