Kenya’s cellular operators headed for furious price rows

Kenya’s four mobile network operators have, since 2012, engaged in endless competitive campaigns to gain market dominance over each other. Fresh price rows could be in the offing, analysts say.

According to reports, the operators, Safaricom, Airtel, Yu, and Orange included, have recently engaged in aggressive promotional tariff inventions. This could suggest the operators are bracing for another bout of tariff wars.

Last year, Airtel’s price reductions made it the cheapest network for off-net calls. The price war saw Safaricom’s stock price give way, underscoring the challenge for telecom companies to maintain profitability given the low-margin. Safaricom’s shares, traded on the Nairobi Stock Exchange, had reportedly fallen almost 10 percent over a week.

Safaricom, the dominant operator, is viewed globally as the poster-child for African corporate sensation — and as Kenya’s largest firm by market capitalization — as it grabbed market share through flagship offerings including the M-Pesa, mobile banking service.

Experts say a new fresh gout could be on the offing. Mobile telephony technology watcher Peter Nalyanya on an interview with CIO East Africa said the current promotions have set a stage for a fierce battle amongst the service providers to maintain, and improve, customer base.

Presently, Orange has just launched its new promotional offer dubbed “Sare”, the new tariff will have all its pre-paid customers enjoy free 24-hour on-net calls and SMS services as well as 10 free off-net SMSs.

A week earlier, Safaricom launched another promotion called “Wakenya Tuongee” allowing its customers to pay KSh4 for the first minute they call and KSh1 for calls longer than 3 minutes.

Airtel also recently launched its Klub 254, which offers free music, Facebook and Twitter all for 1KSh a day, and Airtel to Airtel calls and SMS for Ksh1 per minute.

Yu mobile of Essar also have theirs with offers like “free calls all day all night” for Yu to Yu calls with browsing at 50 cents a minute not forgetting their free facebook access and even free phones.

Communications Commission of Kenya (CCK) the regulatory authority in charge of communications in Kenya, filed a report for January-March 2012, which indicated that pre-paid subscriptions which happens to be the market target had grown by 4.0 percent to reach 28.9M way above post paid subscribers at 7.5 percent.

The report further indicated that Minutes of Use (MOU) per subscriber, per month, went down from 77.9 percent to 77.7 percent representing a 2.8 percent fall, making it possible for operators to develop new tariffs to get subscribers to talk even more.

Safaricom last year it had the highest tariffs in the Kenya. The firm had increased on-net and off net tariffs between September 2011 and October 2011. Orange became the heavy-weight operator decreasing the on-net and Orange-fixed off-peak prices between May 2011 and June 2011.

Orange however increased its tariffs over again between November 2011 and January 2012. Yu maintained similar tariff to that of Airtel until September 2011, after which it decreased its on-net peak tariff.

CCK triggered the price wars in 2010 after it cut interconnection tariffs by 50 percent, based on a report that established the existing interconnection rates “were way too high.”

Kenya’s government early last year reportedly lost nearly Sh1.5bn in tax collected on airtime due to the tariff wars. The shortfall to the country’s revenue authority Kenya Revenue Authority is attributed to mobile users spending much less on airtime.

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