Is Safaricom finally winning the price war?

Intergrated telecommunications giant Safaricom posted a 113 percent growth in its pre-tax profit largely attributed to the company’s upward revision on its calling charges.

Safaricom’s newly acquired shot in the arm is perhaps the harvest of a bold move by the company to standardize its on-net and off-net call charges to KSh4 from the previous  KSh3 a minute for on-net calls and KSh5 for off-net.

The move came after the company in its 11-year history posted a drop in earnings after its net profit dropped by 13.2 percent as call rate cuts by its competitors led to the company revising its charges much to its detriment.

However after the company introduced a new rate which saw charges surge by 25 percent everything seems to be back on course as the company remains profitable even as its competitors struggle to stay afloat.

Just last week, its greatest competitor Airtel posted KSh8.4 billion loss amid increase in voice traffic.

Another competitor also operating using the low cost model Yu network is up for sale by its Indian owners Essar after a streak of losses.

The losses even as the both firms call for a decrease in mobile termination rates to the acrimony by safaricom. So who is fooling who?

One thing is clear though, reduced calling rates have played a greater role in the dimmed prospects of both companies. Although both Yu and Airtel have increased their market share, they have been unable to operate profitably.

The increase in voice revenue by Safaricom may however be seen as a result of a number of product launches meant to increase calling time at a period that has seen decreased traffic in the telecommunication sector.

Although all companies have come up with products to increase voice revenues yet again, Safaricom’s Wazua tariff has stood out from the clutter remaining the most expensive. The tariff unlike other models by the competitors rewards on the length of calls dropping from KSh4 a minute to KSH1 a minute after 3 minutes.

The other models are however beat logic on how the companies expect to remain afloat with Yu operating a free All day model while Airtel charging a fixed 4 shillings despite the length of the call.

Many will agree that the other companies are suffering from a ‘self inflicted war’ mostly precipitated by the desire to increase their market share rather than their revenue.

For the first time in the 3-year price war, statistics point to Safaricom as winning despite receiving a beating in its market share that dropped from a high of 80 percent to just over 64 percent, according to the recent quarterly financial results.

However, even as the voice revenue war seems closer to the end, its competitors’ have their arsenal locked on a new frontier, mobile money transfer.

Posted in: FeaturedTelecoms

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