Telecommunications firm Safaricom has said it will not be sucked into a price war with Airtel.
The company said it would not bring down its calling rates even if sticking to the current prices meant losing customers to its rival, whose charges are now 50 per cent lower than those of Safaricom.
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Airtel Kenya reduced its on-net and off-net rates by half to Sh2 on Wednesday. The firm hopes that the move will earn it new subscribers and sustain its customer acquisition spree that saw it increase its subscriber numbers by 18 per cent in the quarter to March.
The rates are in comparison to Safaricom’s Sh4 per minute and Telkom’s Sh3 for off-net calls and Sh2 for calling within the network.
Safaricom Chief Executive Bob Collymore said his firm would disregard the pricing by the competition even if it hits rock bottom.
“We are not going to bring down our prices, we will continue to charge (current prices) and if we lose market share then it is fine… we have to maintain a sustainable business,” he said during a breakfast meeting yesterday.
He added that the decision to retain the Sh4 per minute call charge was informed by the need to continue investing in infrastructure.
Mr Collymore recounted a previous price war that started in 2010, which was driven by Airtel, when it dropped its calling rates to Sh3 per minute from Sh8 for calls within its network while calls to other networks reduced from Sh12 to Sh3.
Other telcos, Essar (yuMobile) – which has already exited the market – and Telkom (then trading as Orange) as well as Safaricom were sucked into the war, much to the reprieve of consumers.
“We are seeing a replay of history and see a price war coming. People will blame Safaricom for the ills that we are about to see,” said the CEO.
“What happened when I first came to this country, we went down to Sh2 and at some point it was Sh1.”
Collymore said the prices would leave the operators without funds to invest in infrastructure.
“We said if you are charging people these kind of low prices, you will not be able to invest in the industry so we put our prices back so that we could continue to invest,” he said.
“The results of that is that we have 4,800 base stations and they have far fewer because they were not charging the right prices. They are doing that again and will later say they are not making profit.
“I have an eight-year-old who is not that great at math but will tell you that it is going to cause you problems at some point.”
Safaricom is already losing market share, while Airtel has been growing. The latter has reported major gains in market share in the recent past with its subscriber base growing by 18 per cent during the third quarter of the 2017/2018 financial year.
Data from the Communications Authority of Kenya (CA) indicates that Airtel had 8.7 million customers by end of March this year from 7.3 million in December 2017.
It was the second consecutive quarter that Airtel experienced a substantial growth, with its numbers increasing 20 per cent in the quarter to December last year, from 6.1 million in September to 7.3 million.
Some of the growth has been linked to the political sentiments then, when the Opposition called on supporters to boycott products by Safaricom.
Airtel however said it has made decisions that are resonating with customers including the rollout of a 4G network in major towns across the country.
Regulatory changes such as mobile money interoperability, which enables users to receive money from different networks into their mobile wallet, could also see Safaricom lose its hold on some customers.