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Safaricom slashes SMS costs in fresh battle with rivals

FINANCIAL STANDARD
By WINSLEY MASESE | Apr 1st 2014 | 2 min read
By WINSLEY MASESE | April 1st 2014
FINANCIAL STANDARD

By WINSLEY MASESE

Kenya: The battle over control of the telephony industry in Kenya is set to shift to new scales. This follows the slashing of rates for sending short text messages (SMS) across all networks by Safaricom.

It’s also an indication of a corporate strategy to switch its growth gears from voice to data. This is after the latter showed promising returns during the 2013 half-year financial report. “It will now cost you Sh1 to send an SMS across all networks,” the advert appearing Monday read. Sending SMS from Safaricom used to cost about Sh2.

Consolidating market share

This, however, holds for texts that are up to 160 characters. Dubbed bob sasa, the strategy valid from today is part of its approaches to consolidate its market share and leverage on its other services such as M-Pesa.

Being quicker, cheaper and instant, text messages have been viewed as the next growth frontier in the industry, with a growing number of mobile users, especially the youth, preferring to communicate through text compared to voice.

During the 2012/2013 financial year, the Communications Commission of Kenya (CCK) ICT sector fourth quarter report indicated that total local mobile traffic declined by 1.1 per cent, recording a total of 7.1 billion minutes compared to 7.18 billion in the previous quarter.  The overall mobile voice traffic per subscriber dropped from 81.1 minutes recorded in the previous quarter to 78.4 minutes. “The decline in mobile voice traffic could be due to availability of affordable communication alternatives such as SMS and other mobile applications such as WhatsApp that have continued to gain popularity and hence affecting growth in local mobile traffic,” says CCK.

The report also indicated a growth in text message usage with a total number of SMS messages standing at 4.3 billion up from four billion posted in the previous quarter. The development comes at a time when Airtel and Safaricom prepare to acquire Essar Kenya Ltd (yuMobile) assets through a joint bid. By acquiring yu’s assets, Safaricom expects to improve its service quality. The latest CCK report ranked Orange as the best quality of service network in 2013. In its half-year profit, non-voice service revenue streams recorded a 30 per cent improvement with Chief Executive Bob Collymore attributing it to continued execution to diversify revenues.

SMS had the highest growth of any single revenue stream at 48.7 per cent to Sh6.35 billion. Safaricom has also been granted approval by the Capital Markets Authority for the issuance and listing of an additional 20.8 million ordinary shares to the Safaricom Employees Share Option Plan.

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