Termination rate cut to boost Saudi competition

Dubai: Saudi Arabia may cut call-termination rates for telecom operators in 2013, the chief executive of Etihad Etisalat (Mobily) told Reuters, in a move that would spur increased competition in the kingdom.

Termination rates are fees that one telecom operator charges another for terminating calls on its network. The fees tend to favour more established operators because they terminate a greater portion of calls.

"Next year, I think you will see a reduction in termination fees, unless the regulator foresees a more accelerated termination (reduction) rate to be introduced," said Khalid Al Kaf, chief executive of Mobily, an affiliate of the UAE's etisalat.

"I want to stay neutral in that area," added Al Kaf, when asked whether he would favour a cut in termination rates.

Higher margin

Saudi termination fees have remained unchanged for more than four years at 0.25 riyal (Dh0.24)) for mobile-to-mobile and fixed line-to-mobile calls and 0.1 riyal for mobile-to-fixed line calls, effectively setting minimum call prices.

Termination fees only apply on cross-network calls, while consumers pay the same rate regardless, so operators have a higher margin on calls within their own network.

"Termination charges tend to fall as competition increases. Usually, operators pass on part of any cut in termination fees to consumers," Marc Hammoud, Deutsche Bank telecoms analyst, said.

As the former monopoly telecom operator in the country, Saudi Telecom Co could have the most to lose from a fee cut, analysts said.