Airtel rejects price war claim

Airtel CEO Prasanta Das Sarma accompanied by Legal and Regulatory Director Joy Nyaga when they appeared before the National Assembly Communication, Information and Innovation Committee. [Boniface Okendo/Standard]

Airtel Kenya has refuted claims that its latest cut in calling rates is meant to spark a price war with its rivals.

Managing Director Prasanta Das Sarma said the telco slashed its calling rates to Sh2 per minute from Sh4 across networks as a customer acquisition and retention strategy.

He said the firm had over the past one year increased its subscriber base by about two million customers and was keen on retaining the new and old clients as well as sustain the growth in numbers.

“The new tariff is giving us traction and if more customers come then we will ultimately benefit. If customers are happy, they do not mind spending more time on your network using your services. Giving value to customers will enable us grow the business profitably,” said Mr Sarma in an interview.

The price cut been criticised, with a segment of the industry terming it an attempt to pull other players into a price war.

Though low prices are usually a reprieve for consumers, players have in the past expressed concerns that an all-out price war would have the same repercussions as the one in 2010 and 2011 that left them drained and without resources to reinvest in their operations.

Mobile interoperability

At the time, prices dropped from about Sh12 on average to Sh4 per minute.

In some instances the calling rates went down to Sh1, which led some of the players to ask the regulator to put in place a price floor.

Safaricom Chief Executive Bob Collymore at a recent press briefing in reaction to Airtel’s decision said charging Sh2 a minute for voice calls would deny the firm money to reinvest in infrastructure in the future.

“We are seeing a replay of history and see a price war coming… (in 2010) we said that by charging people these kind of low prices, you would not be able to invest, so we put our prices back up so that we could continue to invest,” he said.

In under a year, Airtel has increased its subscriber base by over two million to 8.7 million from 6.5 million.

Sarma maintained that further growth of Airtel and other small telcos as well as new entrants could be enhanced by regulators further levelling the playing field.

So far, there are interventions such as mobile money interoperability and infrastructure sharing on a commercial basis, which are largely industry-led.

“In any telecom market, regulators play a critical role in ensuring there is market competitiveness. If a market is competitive, all stakeholders – operators, shareholders and consumers – are happy. The regulators are there to ensure that the customers get the best deal. We have told regulators to do an independent study to ensure all conditions in the market are right,” Sarma said.

He further defended his firm, which has come under heavy criticism from Safaricom and some industry regulators for little investments in infrastructure locally, saying it has made substantial investments.

Sold towers

“In 2010 when Airtel came into the Kenyan market, we had about 600 sites but this has grown to over 1,600 sites. By then, we just had a 2G network. We have now introduced 3G and 4G services and are investing in expanding our coverage to other parts of the country,” said Sarma.

“What you see are just the towers but there is the backbone network that we have been investing in. These are ongoing. Tech changes fast and we have kept pace through continuous investments… we have kept up with changes through investments.”

Airtel sold its towers to Eaton Towers in 2014 for Sh19.5 billion in a deal by its parent firm in India that disposed of such infrastructure in a number of markets in Africa.

This has seen Kenyan authorities point out the sale as one of the weaknesses that have retarded the growth of not just Airtel but also Telkom Kenya, which entered into a similar deal with American Towers.