Kenyans should expect a price hike in call rates in the coming months, with the recent announcement by Airtel Kenya not to cut its tariffs in line with planned reduction in the mobile termination rates (MTR).

The termination rate, the amount an operator pays rivals if its subscribers call another network, has fallen from $0.05 in June 2009 to $ 0.027 in July 2010.

Francis Wangusi, acting director at the Communication Commission of Kenya (CCK) said, “the termination rate would drop to $0.017 per minute in July 2012 from the current $0.027”.

The CCK's move was expected to give operators room to cut the calling rates and wage a price war in a bid to grow market share.

In 2010, Airtel took advantage of the lower termination rates to halve its tariffs in what sparked a price war as other operators led by Safaricom followed suit, which saw Kenya emerge with cheapest calling rates in Africa.

However, the move slashed the industry's earnings and saw Safaricom report a decline in profits as rivals like Telkom Kenya sunk deeper into losses.

And Airtel says it will use savings, which will come from paying less to its rivals for handling its calls, to upgrade its network.

"We are fully behind CCK move to continue with the MTR glide path but will not lower our tariffs at this moment as we will use the cost savings to upgrade our network," said Shivan Bhargava, managing director at Airtel Kenya.

The price wars have slashed Kenya's mobile industry's earnings and made it difficult for some operators to recover the cost of handling out-of-network calls.

Mr Wangusi said 93% of the operator's revenue comes from calls within their networks and that lowering the termination rates has very little impact, if any on the profitability of the operators.

Safaricom has been against the move saying the current termination rates are based on an outdated model and asked CCK to carry out a fresh study that will reflect the cost of doing business in Kenya's voice market in line with Uganda and Tanzania.

Its rivals Airtel and Essar are pushing for lower termination rates, arguing that they are paying Safaricom a huge chunk of their revenues since it handles the bulk of the cross network call due to its dominance in the voice market.