TELECOMS

Orange gains as Airtel loses in market share war

Telkom Kenya has emerged as the biggest gainer of the ongoing price war in the mobile telephony market that has seen operators freeze employment and cut investments by a third.

Data from the Communication Commission of Kenya (CCK) indicated that Telkom Kenya was the only operator that gained subscribers in the six months to June with Airtel — which kicked off the price wars in August last year — being the biggest loser.

Telkom’s market share grew to 10.7 per cent in June from 8.5 per cent in December having added 595, 555 subscribers as Airtel’s stake dropped to 14.2 per cent from 15.1 per cent after shedding 177, 000 subscribers.

Essar, owners of the yu brand, lost 8,753 subscribers that pulled its market share from 6.3 per cent to 5.9 per cent in same period with Safaricom’s share having dropped to 68.6 per cent from 69.8 per cent as it lost 98,139.

The change in market position was attributed to turf wars in the industry especially in the voice markets after Airtel halved it call rates to Sh3 that prompted its rivals to follow suit in a shift that has seen the operators cut jobs to 5, 827 employees in June from last year’s 5, 869, which had more than doubled from 2, 389 in 2009.

“Our efforts during the period was mainly focused on increasing of distribution network there by bringing our products nearer to the consumer which we had identified as our major undoing before,” Mickael Ghossein, Telkom Kenya CEO told the Business Daily.

He added that the firm’s pricing model, especially the flat rate, also helped Telkom Kenya to defend and grow its subscriber base. The firm was the first to introduce the fixed rate mobile charges that allowed subscribers to make free calls between 10am and 5pm for a monthly charge of Sh100—a tariff that allowed it to grow subscribers.

It later in April upgraded its fixed rate to Sh600 per month for voice and Internet—a strategy that allowed it to price its products above the industry’s annual revenue per user (ARPU) —which stands at Sh348 down from Sh389 in 2009 and Sh425 in 2007.

Airtel and Essar also introduced a flat rate for steady and predictable revenues in a business environment that has seen sales from the voice business fall in the wake of a vicious price war. Telkom also managed to keep calls within its networks at rock bottom prices compared to its rivals helping grow its subscriber base.

Telkom charges Sh2 per minute for on-net calls and Sh4 for off-net. Rival Airtel charged Sh3 across all networks while Safaricom charged Sh3 for on-net calls and Sh4 for off-net before increasing the rates last Friday by Sh1 to boost its sales and profits.

Kenya’s call rates came down by more than 50 per cent in August last year after Safaricom’s rival, Airtel, halved its call rates to Sh3 with the drop in Mobile Termination Rates — the fee that telecoms operators charge each other for calls terminated on their rivals network to Sh2.21 from Sh4.42.

Source: Business Daily Africa

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