Issue Seven - Conversations on Technology, Business and Society

NEWS
12
Zain vs. Safaricom
Price wars bring more choice to Kenya’s Subscribers
BY MICHAEL OUMA
NAIROBI
After trying to stay put and less
reactionary to Zain Kenya’s new
reduced tariffs which saw the mobile
operator attract new subscribers in droves
from rival networks, Safaricom has been on
the offensive over the last three weeks.
Safaricom’s new tariff schemes are a
response to Zain’s call and short
message service (SMS) tariff
reductions.
Zain Kenya, country’s second
largest mobile network operator
in terms of subscribers and which
was among the 15 Zain Africa
subsidiaries acquired by India’s
Bharti Airtel in June, slashed
tariffs by 50 percent last month.
Zain dropped its rates to Ksh
3 (US $ 0.04) per minute last
month, forcing Safaricom to
introduce new tariff structures,
with some as low as 2 shillings
per minute. The other mobile
service providers - Telkom
Orange and YU - also made
reductions on their voice and
SMS tariffs.
The tariff reductions followed
the telecoms industry regulator
Communication Commission
of Kenya’s (CCK) introduction
of new mobile interconnection rates in the
country in August. After a network cost study
carried out by Analyssis Mason of UK, the CCK
revised down the mobile interconnection fees
from Kshs 4.42 (US $ 0.06) per minute to Kshs
2.21 (US$0.03).
The move by the CCK to review the rates
downwards was aimed at encouraging
telecoms operators to lower call tariffs. The
CCK aims gradually to reduce the fees to Kshs
0.99 (US$0.013) by 2013.
Zain Kenya was the first to react to the
CCK’s move, slashing its call rates and SMS
costs by up to 50 per cent and 80 per cent
respectively.
The tariff reductions followed the
Communication Commission of Kenya’s (CCK)
introduction of new mobile interconnection
rates in the country in August. After a network
cost study carried out by Analyssis Mason
of UK, The CCK revised down the mobile
interconnection fees from Kshs 4.42 (US $
0.06) per minute to Kshs 2.21 (US$0.03).
The move by the CCK to review the rates
downwards was aimed at encouraging
telecoms operators to lower call tariffs. The
CCK aims gradually to reduce the fees to Kshs
0.99 (US$0.013) by 2013.
Zain Kenya was the first to react to the
CCK’s move, slashing its call rates and SMS
costs by up to 50 per cent and 80 per cent
respectively.
Even though Safaricom’s newly introduced
tariff structures focused only on voice services,
the firm recently introduced new SMS
tariff structures that are subscription based
and have to be utilized in 24-hours after
subscription.
After the elapsing of the one-day period
after subscription, the subscriber forfeits any
remaining SMS and is then eligible for a new
subscription.
Under the new tariff plan dubbed ‘Masaa
ya SMS’ and which applies to both pre- and
postpaid subscribers, the market leader’s
16 million customers are able to send text
messages for as low as 20 cents each per text.
The new SMS tariff structures, which allow
subscribers to send text messages within the
Safaricom network at various graduated rates
depending on what SMS bundle one selects,
is an improvement on the firm’s earlier service
called “GO SMS CRAZY.”
In the new plan, a bundle of 100 SMS
will be available at Ksh20 (US $ 0.25) which
denotes a unit price of 20 cents per message
sent, a huge reduction from the firm’s earlier
SMS tariff of Kshs 3.5 (US $ 0.025)per text.
Subscribers will be able to buy some 20 text
messages for Kshs 10 (US $ 0.125), translating
into 50 cents per text message. The last
SMS tariff bundle, for Kshs 5 (US $ 0.0625)
will accord a subscriber five text messages,
thereby translating into a unit price of Kshs 1
(US $ 0.0125) per text.
PC TECH | SEPTEMBER - OCTOBER 2010 | pctechmagazine.com
The “Masaa ya SMS” tariff plan, which is a
permanent tariff and not a promotion, is an
improvement from service provider which
initially used to charge Kshs 3.5 (US $ 0.025)
for both on-net and off-net text messages.
Michael Joseph Safaricom’s outgoing chief
executive, said “Masaa ya SMS” was a way
of thanking the firm’s over 16 million Kenyan
subscribers for their loyalty, adding that the
company would continue to create “true value
for its subscribers by
deliberately listening
to them and coming
up with products and
services that best
answer their needs.”
Safaricom’s move to
reduce its SMS tariffs is
being seen by industry
analysts as meant to
pre-empt a November
deadline set by the
CCK that could compel
service providers to
reduce the average
cost of text messages to
below one shilling.
“The Commission
has confirmed glaring
distortions in the
pricing of SMS services
in the country. CCK
considers the wholesale
termination rate of two
shillings per SMS negotiated by the operators
extremely high,” said Charles Njoroge, the
CCK director general in an earlier statement,
adding that all operators must renegotiate
lower mobile and fixed SMS termination rates
and file the new rates with the Commission
within three months.
The industry regular further noted that
extending SMS services to consumers costs
just Kshs 0.01 for each SMS sent over a
network, which indicates that mobile network
service providers retain the remainder of the
funds as profits.
The country’s three other operators - Zain
Kenya, Essar Telecom YU and Telkom Orange
- are currently charging between one and two
shillings for on-net SMSes, but the CCK hopes
to lower that rate as part of a comprehensive
industry cost review exercise.
Industry statistics indicate that about 200
million SMSes are sent in Kenya on a monthly
basis, with the average number of SMS sent
per month per subscriber being about 13.
The CCK says this figure has almost doubled
in the last few months per each subscriber
on a monthly basis, further urging operators
to reduce the rates to more realistic rates by
November this year.