By Jackson Okoth and Reuters

Increased competition in mobile telephony is expected to slash Safaricom’s dominance, with its market share expected to drop from 80 per cent to 65 per cent in the next four years.

Safaricom expects its market share to fall due to the launch of rival networks, Chief Executive Michael Joseph said on Wednesday.

"We will have between 65 per cent and 70 per cent market share by 2011," Mr Michael told delegates attending an African telecoms conference in Cape Town.

Its closest competitor, Zain, has repackaged its tariffs and product offerings, targeting the lower segment of the market, previously dominated by Safaricom.

State-owned Telkom Kenya has also made an entry into the mobile phone business, and is rapidly building a GSM network called Orange, with financial muscle from France Telkom.

In response, Safaricom has been putting more money into its data services. Through its subsidiary One Communications, Safaricom is building a WiMax network, to complement its broadband service launched in August this year.

"We are diversifying our revenue streams, with a shift from the voice market. Which is becoming increasingly unattractive, due to the low tariffs, to data," Joseph told the Standard recently. Unveiled last week, the wireless network delivers high-speed data, video and voice services to its corporate clients.

In June, the Government sold its 25 per cent stake (Sh50 million) in Safaricom through an Initial Public Offer. With the issue being oversubscribed by 236 per cent, Safaricom shares have been under speculative attack since they begun trading.

Its share price at the Nairobi stock Exchange has also been hit by prevailing bearish conditions, opening trade at Sh3.80 on Wednesday from the previous Sh3.85.

Joseph says Safaricom will be relying on its broad network to fight off aggressive competition from closest rival Zain, which has cut call rates sharply to attract and retain subscribers. A fourth player, Econet Wireless, is expected to start operations at the end of this month, further crowding the field.

Safaricom has spent close to Sh10 billion to expand its network, and win new subscribers, raising its market share to 81 per cent.