When Communications Commission of Kenya director-general Joseph Waweru told journalists last November that mobile phone call tariffs would drop by half in the next 12 months, very few believed such a feat was achievable. Then, the average cost of a wireless call within one network stood at a high of Sh30 per minute, while calls across networks were priced at as high as Sh50 per minute.

According to Mr Waweru, the move would be driven by the entry of a new player on the market - Telkom Wireless.

When Communications Commission of Kenya director-general Joseph Waweru told journalists last November that mobile phone call tariffs would drop by half in the next 12 months, very few believed such a feat was achievable. Then, the average cost of a wireless call within one network stood at a high of Sh30 per minute, while calls across networks were priced at as high as Sh50 per minute.

According to Mr Waweru, the move would be driven by the entry of a new player on the market - Telkom Wireless.

Eight months have passed since Mr Waweru made the statement and the mobile phone market has changed completely. Mobile phone service provider, Celtel, was the first to make a move with the introduction of a uniform tariff for calls to all networks taking advantage of CCK's directive on interconnection charges.

Safaricom, the market leader followed suit with a new set of tariffs across all its services. This offered consumers huge concessions on airtime costs bringing the average call costs to Sh14 per minute and Sh20 per minute for intra-network and across network calls respectively. But as Mr Waweru predicted, this drop in call costs is being driven by Telkom Wireless, the government-sponsored and CDMA-based service that was officially launched in June and boasts of the cheapest tariffs in the market.

Subscribers to the service can make calls to other networks for only Sh24 per minute and for a rock bottom price of Sh5 per minute within its network.

Besides, the service, run by national operator Telkom Kenya, is offering corporate clients irresistible packages that include employees of big companies using the wireless service as extensions even when out of the office. Safaricom and Celtel reckon that Telkom is only able to offer these savvy packages because of a regulatory loophole that has seen it exempted from paying excise duty on the tariffs.

But they are not just complaining. The two mobile phone service providers have continued to protect their turfs with new products and services with pricing as the main battle front. The free fall of costs deepened last week when Celtel Kenya launched two new products for its voice and data markets.

The company introduced data services on its One Network, declaring it yet another first in the global communications market and introduced the Shuka Shuka tariff structure that offers consumers price concessions based on the length of calls.

These new services are expected to boost Celtel's bid to grow its subscriber base that has seen it increase by a million since the launch of flat calling fees in December. Shuka Shuka is a three step pre-paid tariff with a flat rate, across all networks that is priced at Sh20 per minute for the first minute then dropping to Sh14 for the second minute and Sh8 per minute thereafter.

Mr David Murray, the CEO Celtel, reckons that this new tariff is also a driver of the company's Uhuru philosophy of widening the range of tariff choices and deepening its non-discriminatory pricing policy.

The new data service, dubbed One Office, allows Celtel subscribers in Kenya, Tanzania and Uganda to access Internet services for a flat fee whatever their location. "This is yet another indication that East Africa has become one of the key drivers of the fast-changing world of telecommunications," Mr Murray said. The mobile services company is banking on better pricing to boost access to data services in the region. It also signals Celtel's continued focus on high-end consumers as well as its bid to rope in customers in the small and medium enterprise market.

Both pre and post paid subscribers can access the service without set-up fees or extra start-up costs, providing they own a GPRS enabled phone or Blackberry device.

At a price of Sh30 per megabyte downloaded consumers can receive about 300 emails for that one flat fee.

Analysts say these price fights in the various segments of the market indicate a realisation among service providers that the steady growth in subscriber base that has been recorded over the past five years is thinning out shifting attention to the provision of value added services to solidify their key revenue streams.

"Infrastructure is one of the key bottlenecks and principal reason for the high cost of doing business in Africa, which is a drag on economic competitiveness," said Edward Nassim, Vice President for Africa, the Middle East, and Europe for IFC.

Economic competitiveness

The organisation recently approved a Sh10 billion loan - the largest ever struck on the continent - with Celtel to fund an aggressive expansion network upgrade and expansion plan.

The mobile company's network already covers over 400 million people, which is close to half of Africa's population.