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3 Reasons Why the Kenyan Mobile Tariff Price War Matters to ICT Companies

By Wayan Vota on August 27, 2010

Kenyan consumers are rightly excited that the mobile phone company Zain, now owned by Bharti Airtel, has kicked off a price war with just announced unprecedented low and permanent new tariffs of Kes. 3.00 to call and Kes. 1.00 per SMS message to any mobile network in Kenya. This huge price reduction caused such a storm of traffic on Zain’s network, they actually had connectivity problems with other mobile phone companies.

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Safaricom, the dominant mobile phone company in Kenya, is responding with the “Masaa Tariff” – Safaricom customers will be able to make calls within the network at between Kes. 2.00 to Kes 4.00, with Kes. 2.00 per minute now the lowest calling rate on any mobile network operator in the Kenyan market. Orange/Telkom Kenya has matched this pricing and other mobile phone companies are expected to follow suit with their own price decreases in the coming days.

This price war is an obvious benefit to all Kenyans in lowering the barrier to using mobile devices, but what about its impact on ICT companies? How does the mobile price war help ICT adoption and sales volume beyond just dropping call and SMS costs? Here’s three ways:

1. Visible Impact of Good Government Policy

The mobile phone price war started when the Communications Commission of Kenya (CCK) cut interconnection tariffs by 50%, based on a report that determined the existing interconnection rates were way too high. A second tariff lowering will occur in 2011.

This immediate price war is a big, bold validation that lowering government-controlled tariffs directly benefits its citizens where there is already a decent level of competition. Hopefully the regulators in other countries who control mobile and Internet rates will realize that lowering those rates is a net benefit for everyone

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2. Stimulate More Services & Innovation

Now that voice and especially SMS are no longer the fat cash cows of quarters past, Safaricom and Zain will need to bring more services and more innovation to the mobile subscriber to maintain their revenue per user. This means more than just M-PESA and its clones, but also new data services and even whole new solutions.

For ICT companies this is an opportunity to sell new mobile services to these companies and their subscribers – Safaricom and Zain will be hungry for new ideas. It’s also an opportunity to build on the new services they roll out, with value-added solutions. Many have already done this with SMS, data, and M-PESA and your underlying connectivity costs are only going to drop, increasing your profit margins.

3. Increase Customer Respect

Last but not least, ICT companies as customers of the mobile companies should start to see more attention paid to them. Each business subscriber is going to be come more valuable, as they are the high-usage and high-income clients in Kenya. This will only be more apparent when mobile number portability comes to the Kenyan market.

For larger ICT companies (and even small ones) it is a good time to review your current contracts with mobile providers and see if you can reduce costs and increase services. You may even get the mobile company representatives to have a bit of humility. Or as this tweet from Rombokins says:

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Written by
Wayan Vota co-founded ICTworks and is the Digital Health Director at IntraHealth International. He also co-founded Technology Salon, MERL Tech, ICTforAg, ICT4Djobs, ICT4Drinks, JadedAid, Kurante, OLPC News and a few other things. Opinions expressed here are his own and do not reflect the position of IntraHealth International or other ICTWorks sponsors.
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One Comment to “3 Reasons Why the Kenyan Mobile Tariff Price War Matters to ICT Companies”

  1. Wayan Vota says:

    Safaricom just slashed the cost of SMS text messages by as much as 94 percent in an escalation of a price war triggered last month by a reduction in connection fees.

    Customers will be offered the option of buying a bundle of 100 text messages for 20 shillings, the equivalent of a unit- price of 20 cents each, the Nairobi-based company said in an e- mailed statement today. The company will also sell bundles of 20 texts for 10 shillings and 5 messages for 5 shillings.

    From Safaricom of Kenya Slashes Mobile Text-Message Cost by 94% Amid Price War