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Changing urban preferences may spell doom for Bamba 5

BUSINESS
By - | February 11th 2013

By Paul Wafula

Small denomination mobile phone airtime vouchers are quietly disappearing in major towns as dealers shy away from distributing them citing thin margins and low demand.

A spot check by The Standard in the Central Business District, the Jomo Kenyatta International Airport (JKIA) and strategic airtime retail kiosks over the last two weeks showed that the Sh5 denomination airtime vouchers were out of stock.  And in places where the Sh10 voucher was available, dealers interviewed noted that most buyers were asking for the voucher in combination with higher denomination airtime.

“We earn just cents selling the Sh5 denomination airtime and with the current economic conditions; that doesn’t make a business sense. Consumers also hardly asking for them. And if they do, and don’t find it, and they tend to buy the next available denomination on the line,” a sales representative at one of the airtime Kiosks told The Standard.

He requested not to be named on grounds that he may be victimised. Retailers earn about five per cent of the value of the airtime meaning that they take home Sh1 for selling Sh20 airtime voucher, 50 cents for selling the Sh10 voucher and 25 cents for the Sh5 voucher.

Safaricom launched the low denomination airtime in November 2009. It branded them as Bamba 5 and Bamba 10 respectively, representing vouchers selling at Sh5 and Sh10 respectively. The airtime is available both as scratch cards and also through electronic top-ups.

Demand and supply

“We have not pulled out of the low cost airtime and neither have our dealers, but what is happening in the marketplace could be a question of demand and supply,” Ms Victoria Kaigai, the Head of PR and communications at Safaricom told The Standard. The trend is however limited to the upmarket parts of the city. It is also an indicator of just how low consumers are willing to spend on airtime in what may make Sh20 airtime scratch card the lowest denomination in circulation.

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When it launched the low denomination airtime, the mobile operator said they would enable it’s prepay subscribers to purchase airtime, even at times when they are not in a position to raise higher sums of money. 

The recent findings come at a time when airtime is becoming a basic need and at times rivaling food in priorities of spending even among the low-income population. 

A recent study released by the World Bank showed that seven out of 10 poor people — referred to as the base of the pyramid in the report — cut down on food expenses to spare money for airtime.

The report — dubbed ‘Mobile Phone Usage at the Kenyan Base of the Pyramid’ — noted the preference for airtime reflects the changes in spending priorities brought about by penetration of mobile phones.

Making sacrifices

The study found that 83 per cent of the low-income population surveyed kept aside up to Sh100 from basic needs to buy airtime. Meanwhile, 70 per cent sacrificed provisions of between Sh101 and Sh500, while another 83 per cent cut their expenditure by between Sh501 and Sh1, 000 to get funds for airtime.

Nine per cent of those polled also admitted to regularly cutting back on bus fare to save up to Sh100, while another 10 per cent saved between Sh101 to Sh500.

A similar study in the Philippines found that mobile phone and credit purchases had displaced tobacco consumption, while in Uganda women were willing to forego store-bought items to stay connected.

Safaricom has been one of the most aggressive operators targeting the mass market after it introduced the low denomination vouchers as well as the per-second billing model. It pioneered the move from the Sh250 vouchers to Sh100, then Sh50, and Sh20 vouchers before going further down to the Sh10 and Sh5 vouchers.

 


 

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