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<div class=Section1>
<p class=MsoNormal><span style='color:black'>Listers, <o:p></o:p></span></p>
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<p class=MsoNormal align=center style='text-align:center'><b><span
style='font-size:28.0pt;line-height:115%;font-family:"Times New Roman","serif";
color:white'>PRESS STATEMENT <o:p></o:p></span></b></p>
</div>
<![if !mso]></td>
</tr>
</table>
</span><![endif]><![if !mso & !vml]> <![endif]><![if !vml]></td>
</tr>
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</span><![endif]><span style='font-family:"Times New Roman","serif"'>
<img width=104 height=143 id="_x0000_i1026"
src="cid:image001.jpg@01CDA6FC.1A9BCD00" alt="CCK logo"><o:p></o:p></span></p>
<p class=MsoNormal style='text-align:justify'><span style='font-size:14.0pt;
line-height:115%;font-family:"Times New Roman","serif"'>10<sup>th</sup> October
2012<o:p></o:p></span></p>
<p class=MsoNormal style='text-align:justify'><b><span style='font-size:14.0pt;
line-height:115%;font-family:"Times New Roman","serif"'>NEWS EDITOR <o:p></o:p></span></b></p>
<p class=MsoNormal><b><u><span style='font-size:14.0pt;line-height:115%;
font-family:"Times New Roman","serif"'>RE: </span></u></b><b><u><span
style='font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif"'> PRESS
STATEMENT ON MOBILE TERMINATION RATES<o:p></o:p></span></u></b></p>
<p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt;
line-height:115%;font-family:"Times New Roman","serif"'>The attention of the
Communications Commission of Kenya (CCK) has been drawn to reports and
commentaries in some sections of the media appearing to suggest that the CCK
Board has been unable to make a decision on the way forward on the
implementation of the glide path on the Mobile Termination Rates (MTRs). The
said reports further suggest that the CCK is hostage and beholden to certain
political and business interests, thus casting aspersions on the ability of the
Communications Commission of Kenya (CCK), as presently constituted, to
effectively regulate the fast-growing ICT sector. The reports have
elicited disquiet in the local ICT market, and therefore merit a response. <o:p></o:p></span></p>
<p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt;
line-height:115%;font-family:"Times New Roman","serif"'>Contrary to the said
reports, the CCK Board and management are, and have always been committed to
promoting a conducive regulatory environment for effective competition in the
ICT industry in Kenya. This commitment explains why there is hardly any market
segment in the entire communications sector today where competition does not
exist. We appreciate that one of the key drivers of competition in any mobile
telecommunications market is the regulation of interconnection. Interconnection
serves as a critical public policy tool for the proper functioning of a
competitive communications market. It is out of this understanding that the CCK
commenced regulation of interconnection in 1999 following the licensing of two
additional mobile operators – namely Essar Telecoms Kenya and Orange Telecoms. <o:p></o:p></span></p>
<p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt;
line-height:115%;font-family:"Times New Roman","serif"'>Indeed, the local
communications market witnessed significant market developments in the period
between 2007 and 2010. Over and above the entry of two new operators, other
notable developments that took place in this period included the introduction
of the Unified Licensing Framework (ULF), landing of three undersea cables and
the roll out of terrestrial optic cables, and tremendous growth in both
subscriber numbers and call and data volumes. <o:p></o:p></span></p>
<p class=MsoListParagraph style='margin:0in;margin-bottom:.0001pt'><span
style='font-size:12.0pt;font-family:"Times New Roman","serif"'>In order to
capture these developments and also include new and up-to-date data in the network
cost modeling, CCK undertook a detailed and consultative review of the Network
Cost Study in 2010 with the objective of developing a new interconnection
framework that promotes competition, operational efficiency of the firms and
further growth of the sector through continued investments and
innovations. <o:p></o:p></span></p>
<p class=MsoListParagraph style='margin-bottom:0in;margin-bottom:.0001pt'><span
style='font-size:14.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></p>
<p class=MsoListParagraph style='margin:0in;margin-bottom:.0001pt'><span
style='font-size:12.0pt;font-family:"Times New Roman","serif"'>Following the
review, CCK issued the Determination No.2 on Interconnection Rates for Fixed
and Mobile Telecommunications Networks; Infrastructure Sharing and Co-location;
and Broadband Interconnection Services on 16th August 2010. The Determination
was to operate from 1st July 2010 to 30th June 2013. Furthermore, the
Determination was updated on 30th December 2010 to include Short Message</span><span
style='font-size:14.0pt;font-family:"Times New Roman","serif"'> </span><span
style='font-size:12.0pt;font-family:"Times New Roman","serif"'>Service (SMS)
Termination Rates effective from 1st January 2011 to 30th June 2013.
According to this determination, the glide path for Mobile Termination Rates
was to proceed as follows:<o:p></o:p></span></p>
<p class=MsoListParagraph style='margin:0in;margin-bottom:.0001pt'><span
style='font-size:12.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></p>
<p class=MsoListParagraph style='margin:0in;margin-bottom:.0001pt'><span
style='font-size:12.0pt;font-family:"Times New Roman","serif"'><o:p> </o:p></span></p>
<div align=center>
<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width=618
style='width:463.6pt;border-collapse:collapse'>
<tr>
<td width=618 colspan=6 style='width:463.6pt;border:solid black 1.0pt;
padding:0in 5.4pt 0in 5.4pt'>
<p class=MsoNormal style='mso-margin-top-alt:6.0pt;margin-right:0in;
margin-bottom:0in;margin-left:.5in;margin-bottom:.0001pt;text-indent:-34.6pt;
line-height:normal;mso-list:l1 level1 lfo2'><![if !supportLists]><b><span
lang=EN-GB style='font-family:"Times New Roman","serif"'><span
style='mso-list:Ignore'>1.<span style='font:7.0pt "Times New Roman"'>
</span></span></span></b><![endif]><b><span lang=EN-GB style='font-family:
"Times New Roman","serif"'>Call Mobile Termination Prices<o:p></o:p></span></b></p>
</td>
</tr>
<tr>
<td width=202 style='width:2.1in;border:solid black 1.0pt;border-top:none;
padding:0in 5.4pt 0in 5.4pt'>
<p class=MsoNormal align=center style='margin-top:6.0pt;text-align:center'><b><span
lang=EN-GB style='font-family:"Times New Roman","serif"'>Nominal KES.<o:p></o:p></span></b></p>
</td>
<td width=107 style='width:80.6pt;border-top:none;border-left:none;
border-bottom:solid black 1.0pt;border-right:solid black 1.0pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=MsoNormal align=center style='margin-top:6.0pt;text-align:center'><b><span
lang=EN-GB style='font-family:"Times New Roman","serif"'>1<sup>st</sup> July
2010<o:p></o:p></span></b></p>
</td>
<td width=102 style='width:76.5pt;border-top:none;border-left:none;
border-bottom:solid black 1.0pt;border-right:solid black 1.0pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=MsoNormal align=center style='margin-top:6.0pt;text-align:center'><b><span
lang=EN-GB style='font-family:"Times New Roman","serif"'>1<sup>st</sup> July
2011<o:p></o:p></span></b></p>
</td>
<td width=103 colspan=2 style='width:77.2pt;border-top:none;border-left:none;
border-bottom:solid black 1.0pt;border-right:solid black 1.0pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=MsoNormal align=center style='margin-top:6.0pt;text-align:center'><b><span
lang=EN-GB style='font-family:"Times New Roman","serif"'>1<sup>st</sup> July
2012<o:p></o:p></span></b></p>
</td>
<td width=104 style='width:78.1pt;border-top:none;border-left:none;
border-bottom:solid black 1.0pt;border-right:solid black 1.0pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=MsoNormal align=center style='margin-top:6.0pt;text-align:center'><b><span
lang=EN-GB style='font-family:"Times New Roman","serif"'>1<sup>st</sup> July
2013<o:p></o:p></span></b></p>
</td>
</tr>
<tr>
<td width=202 style='width:2.1in;border:solid black 1.0pt;border-top:none;
padding:0in 5.4pt 0in 5.4pt'>
<p class=MsoNormal align=center style='margin-top:6.0pt;text-align:center'><span
lang=EN-GB style='font-family:"Times New Roman","serif"'>Mobile Termination<o:p></o:p></span></p>
</td>
<td width=107 style='width:80.6pt;border-top:none;border-left:none;
border-bottom:solid black 1.0pt;border-right:solid black 1.0pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=MsoNormal align=center style='margin-top:6.0pt;text-align:center'><span
lang=EN-GB style='font-family:"Times New Roman","serif"'>2.21<o:p></o:p></span></p>
</td>
<td width=102 style='width:76.5pt;border-top:none;border-left:none;
border-bottom:solid black 1.0pt;border-right:solid black 1.0pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=MsoNormal align=center style='margin-top:6.0pt;text-align:center'><span
lang=EN-GB style='font-family:"Times New Roman","serif"'>1.44<o:p></o:p></span></p>
</td>
<td width=102 style='width:76.5pt;border-top:none;border-left:none;
border-bottom:solid black 1.0pt;border-right:solid black 1.0pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=MsoNormal align=center style='margin-top:6.0pt;text-align:center'><span
lang=EN-GB style='font-family:"Times New Roman","serif"'>1.15<o:p></o:p></span></p>
</td>
<td width=105 colspan=2 style='width:78.8pt;border-top:none;border-left:none;
border-bottom:solid black 1.0pt;border-right:solid black 1.0pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=MsoNormal align=center style='margin-top:6.0pt;text-align:center'><span
lang=EN-GB style='font-family:"Times New Roman","serif"'>0.99<o:p></o:p></span></p>
</td>
</tr>
<tr>
<td width=202 style='width:151.5pt;padding:0in 0in 0in 0in'></td>
<td width=107 style='width:80.25pt;padding:0in 0in 0in 0in'></td>
<td width=102 style='width:76.5pt;padding:0in 0in 0in 0in'></td>
<td width=102 style='width:76.5pt;padding:0in 0in 0in 0in'></td>
<td width=1 style='width:.75pt;padding:0in 0in 0in 0in'></td>
<td width=104 style='width:78.0pt;padding:0in 0in 0in 0in'></td>
</tr>
</table>
</div>
<p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt;
line-height:115%;font-family:"Times New Roman","serif"'><o:p> </o:p></span></p>
<p class=MsoListParagraph style='margin:0in;margin-bottom:.0001pt'><span
style='font-size:12.0pt;font-family:"Times New Roman","serif"'>Following the
issuance of the Determination No.2 of 2010, retail price competition in the
mobile voice services intensified with actual retail off-net call prices
falling from a high of KES 12 per Minute in August 2010 to between KES 5 and 3
per Minute currently. In addition, on-net call retail tariffs dropped
significantly from a high of KES 8 per Minute to KES 3 per Minute over the same
period. The industry also witnessed a significant growth in the number of
promotions and special offers as the operators sought to attract and retain
subscribers. Moreover, mobile operators also intensified efforts to generate
new revenue streams from non-traditional services such as SMS based applications,
Internet offerings and mobile money transfer services through cutting edge
innovations. In addition, important industry demographics such as mobile
subscription and penetration levels improved significantly during the period. <o:p></o:p></span></p>
<p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt;
line-height:115%;font-family:"Times New Roman","serif"'><o:p> </o:p></span></p>
<p class=MsoListParagraph style='margin:0in;margin-bottom:.0001pt'><span
style='font-size:12.0pt;font-family:"Times New Roman","serif"'>Despite these positive
signals in the market, some sections of the mobile telecoms industry and some
government agencies raised concerns that the ensuing retail price competition
arising from the reduction in mobile termination (wholesale) prices was
detrimental to the continued growth of the sector and the economy. In
particular, concern was raised that the retail price competition in the mobile
voice market would adversely affect Government Tax Revenues, stability of the
stock market, the Government’s macro economic agenda on employment and
investments; and the profitability and viability of telecommunication
enterprises.<o:p></o:p></span></p>
<p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt;
line-height:115%;font-family:"Times New Roman","serif"'><o:p> </o:p></span></p>
<p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt;
line-height:115%;font-family:"Times New Roman","serif"'>The CCK Board
considered these issues and at its Meeting held on 20th May 2011 decided to
freeze the mobile and fixed termination rate for year 2010/2011 for a further
one year as the Commission evaluated the veracity of the issues raised by
stakeholders. Consequently, on 8<sup>th</sup> June 2011, the Commission issued
Addendum No.2 to the Determination No.2 of 2010 revising the mobile and fixed termination
rates and the attendant glide path as follows:<o:p></o:p></span></p>
<div align=center>
<table class=MsoNormalTable border=0 cellspacing=0 cellpadding=0 width=631
style='width:473.1pt;border-collapse:collapse'>
<tr>
<td width=631 colspan=6 style='width:473.1pt;border:solid black 1.0pt;
padding:0in 5.4pt 0in 5.4pt'>
<p class=MsoNormal style='mso-margin-top-alt:6.0pt;margin-right:0in;
margin-bottom:0in;margin-left:.25in;margin-bottom:.0001pt;text-indent:-.25in;
line-height:normal;mso-list:l0 level1 lfo4'><![if !supportLists]><b><span
lang=EN-GB style='font-size:10.0pt;font-family:"Times New Roman","serif"'><span
style='mso-list:Ignore'>1.<span style='font:7.0pt "Times New Roman"'>
</span></span></span></b><![endif]><b><span lang=EN-GB style='font-size:10.0pt;
font-family:"Times New Roman","serif"'>Call Mobile Termination Prices<o:p></o:p></span></b></p>
</td>
</tr>
<tr>
<td width=210 style='width:157.5pt;border:solid black 1.0pt;border-top:none;
padding:0in 5.4pt 0in 5.4pt'>
<p class=MsoNormal style='mso-margin-top-alt:6.0pt;margin-right:0in;
margin-bottom:10.0pt;margin-left:19.65pt'><b><span lang=EN-GB
style='font-size:10.0pt;line-height:115%;font-family:"Times New Roman","serif"'>Nominal
KES.<o:p></o:p></span></b></p>
</td>
<td width=90 style='width:67.5pt;border-top:none;border-left:none;border-bottom:
solid black 1.0pt;border-right:solid black 1.0pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=MsoNormal align=center style='margin-top:6.0pt;text-align:center'><b><span
lang=EN-GB style='font-size:10.0pt;line-height:115%;font-family:"Times New Roman","serif"'>1<sup>st</sup>
July 2010<o:p></o:p></span></b></p>
</td>
<td width=81 style='width:60.65pt;border-top:none;border-left:none;
border-bottom:solid black 1.0pt;border-right:solid black 1.0pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=MsoNormal align=center style='margin-top:6.0pt;text-align:center'><b><span
lang=EN-GB style='font-size:10.0pt;line-height:115%;font-family:"Times New Roman","serif"'>1<sup>st</sup>
July 2011<o:p></o:p></span></b></p>
</td>
<td width=87 style='width:65.35pt;border-top:none;border-left:none;
border-bottom:solid black 1.0pt;border-right:solid black 1.0pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=MsoNormal align=center style='margin-top:6.0pt;text-align:center'><b><span
lang=EN-GB style='font-size:10.0pt;line-height:115%;font-family:"Times New Roman","serif"'>1<sup>st</sup>
July 2012<o:p></o:p></span></b></p>
</td>
<td width=84 style='width:63.0pt;border-top:none;border-left:none;border-bottom:
solid black 1.0pt;border-right:solid black 1.0pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=MsoNormal align=center style='margin-top:6.0pt;text-align:center'><b><span
lang=EN-GB style='font-size:10.0pt;line-height:115%;font-family:"Times New Roman","serif"'>1<sup>st</sup>
July 2013<o:p></o:p></span></b></p>
</td>
<td width=79 valign=top style='width:59.1pt;border-top:none;border-left:none;
border-bottom:solid black 1.0pt;border-right:solid black 1.0pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=MsoNormal align=center style='margin-top:6.0pt;text-align:center'><b><span
lang=EN-GB style='font-size:10.0pt;line-height:115%;font-family:"Times New Roman","serif"'>1<sup>st</sup>
July 2014<o:p></o:p></span></b></p>
</td>
</tr>
<tr>
<td width=210 style='width:157.5pt;border:solid black 1.0pt;border-top:none;
padding:0in 5.4pt 0in 5.4pt'>
<p class=MsoNormal style='mso-margin-top-alt:6.0pt;margin-right:0in;
margin-bottom:10.0pt;margin-left:19.65pt'><span lang=EN-GB style='font-size:
10.0pt;line-height:115%;font-family:"Times New Roman","serif"'>Mobile
Termination<o:p></o:p></span></p>
</td>
<td width=90 style='width:67.5pt;border-top:none;border-left:none;border-bottom:
solid black 1.0pt;border-right:solid black 1.0pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=MsoNormal align=center style='margin-top:6.0pt;text-align:center'><span
lang=EN-GB style='font-size:10.0pt;line-height:115%;font-family:"Times New Roman","serif"'>2.21<o:p></o:p></span></p>
</td>
<td width=81 style='width:60.65pt;border-top:none;border-left:none;
border-bottom:solid black 1.0pt;border-right:solid black 1.0pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=MsoNormal align=center style='margin-top:6.0pt;text-align:center'><span
lang=EN-GB style='font-size:10.0pt;line-height:115%;font-family:"Times New Roman","serif"'>2.21<o:p></o:p></span></p>
</td>
<td width=87 style='width:65.35pt;border-top:none;border-left:none;
border-bottom:solid black 1.0pt;border-right:solid black 1.0pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=MsoNormal align=center style='margin-top:6.0pt;text-align:center'><span
lang=EN-GB style='font-size:10.0pt;line-height:115%;font-family:"Times New Roman","serif"'>1.44<o:p></o:p></span></p>
</td>
<td width=84 style='width:63.0pt;border-top:none;border-left:none;border-bottom:
solid black 1.0pt;border-right:solid black 1.0pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=MsoNormal align=center style='margin-top:6.0pt;text-align:center'><span
lang=EN-GB style='font-size:10.0pt;line-height:115%;font-family:"Times New Roman","serif"'>1.15<o:p></o:p></span></p>
</td>
<td width=79 valign=top style='width:59.1pt;border-top:none;border-left:none;
border-bottom:solid black 1.0pt;border-right:solid black 1.0pt;padding:0in 5.4pt 0in 5.4pt'>
<p class=MsoNormal align=center style='margin-top:6.0pt;text-align:center'><span
lang=EN-GB style='font-size:10.0pt;line-height:115%;font-family:"Times New Roman","serif"'>0.99<o:p></o:p></span></p>
</td>
</tr>
</table>
</div>
<p class=MsoNormal><span style='font-family:"Times New Roman","serif"'><o:p> </o:p></span></p>
<p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt;
line-height:115%;font-family:"Times New Roman","serif"'>CCK has since
contracted the services of a consultant to undertake a study on the impact of
the ensuing competition in the retail mobile voice market on the Government Tax
Revenues, stability of the stock market, Government macro-economic agenda on
employment and investments; and the profitability and viability of
telecommunication enterprises. The consultant has submitted an inception report
and is due to present the interim report to the CCK Management and Board soon. <o:p></o:p></span></p>
<p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt;
line-height:115%;font-family:"Times New Roman","serif"'>I wish to assure the
mobile telecoms industry, consumers of ICT services and other stakeholders that
CCK shall make a decision on the MTR as soon as we receive the final report
from the contracted consultant. Our decision shall be fair and in the wider
interest of consumers and mobile telecoms industry, and without influence from
any quarter.<o:p></o:p></span></p>
<p class=MsoNormal style='text-align:justify'><span style='font-size:12.0pt;
line-height:115%;font-family:"Times New Roman","serif"'>I also wish to take
note of the ongoing discussions on the need to align our current legal
framework – that is the <i>Kenya Information and Communications Act, CAP 411A</i>
– with the requirements of the <i>Constitution of Kenya 2010</i>. The
overriding goal of the alignment is to further insulate CCK from commercial and
political interests. We appreciate that the rule and law-making responsibility
in the sector falls within the remit of the Office of the Minister for Information
and Communications. CCK, as an important stakeholder in this process, has
already given its input on this ongoing process. CCK is fully in support of
this process, and it is our hope that the debate shall be healthy and balanced
and in the wider good of the ICT sector. We are confident that the Ministry of
Information and Communications shall midwife this process successfully. </span><span
style='font-size:14.0pt;line-height:115%;font-family:"Times New Roman","serif"'><o:p></o:p></span></p>
<p class=MsoNormal style='text-align:justify'><span style='font-size:14.0pt;
line-height:115%;font-family:"Times New Roman","serif"'><o:p> </o:p></span></p>
<p class=MsoNormal style='text-align:justify'><span style='font-size:14.0pt;
line-height:115%;font-family:"Times New Roman","serif"'>Issued by:<o:p></o:p></span></p>
<p class=MsoNormal style='margin-bottom:0in;margin-bottom:.0001pt;text-align:
justify'><b><span style='font-size:14.0pt;line-height:115%;font-family:"Times New Roman","serif"'>Francis
W. Wangusi<o:p></o:p></span></b></p>
<p class=MsoNormal style='margin-bottom:0in;margin-bottom:.0001pt;text-align:
justify'><b><u><span style='font-size:14.0pt;line-height:115%;font-family:"Times New Roman","serif"'>DIRECTOR-GENERAL</span></u></b><b><span
style='font-size:14.0pt;line-height:115%;font-family:"Times New Roman","serif"'><o:p></o:p></span></b></p>
<p class=MsoNormal><o:p> </o:p></p>
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