9 January 2014

Kenya: Orange Opens New Price War, Targets Voice Traffic

TELKOM Kenya's Orange has launched an onslaught on dominant operator, Safaricom, through its Tujuane tariff, an apparent attempt to rekindle price wars in the competitive 30.5 million subscriber mobile phone industry.

The company yesterday rolled out an aggressive advertising strategy that appeared to be directly targeted at Safaricom which controls over 80 per cent share of voice traffic.

In the print adverts, Orange is using its corporate colour, orange, to demonstrate its relatively lower cost for prepaid calls and Safaricom's corporate colour, green, to depict other networks.

Under the default prepaid tariff, Orange charges Sh2 for on-net(Orange to Orange) calls and Sh3 for off-net(Orange to other networks) calls compared to other operators' Sh4 for on-net and Sh5 off-net.

The tariff, made permanent following a "positive" promotional campaign from April 3 to May 31, last year, charges Sh2 lower on both on-net and off-net calls compared to other operators.

Telkom Kenya's CEO Mickael Ghossein cited a 57 per cent rise in volume of traffic and a 21 per cent increase in revenues during the one-month period that the promotion ran, as the reason for making the tariff permanent.

It remains to be seen whether or not the strategy will rekindle another spiral of price wars that were last witnessed prior to October 2011 when they were raised for the first time since the advent of the mobile telephony industry in the country.

At the time, Safaricom raised its voice tariffs by Sh1 to the current Sh4 on-net and Sh5 off-net a minute following a record spike in foreign exchange and inflation.

Safaricom CEO Bob Collymore, during the firm's last annual general meeting in September 2013, ruled out any further reduction in voice call costs. He said Kenya's cost of making a call per minute was "the lowest in Africa alongside Angola".

Collymore said the price wars that were intense in 2010, dipping to as low as Sh1 per minute for some operators, have had "a devastating effect" on the industry by limiting investment.

Although other operators did not immediately increase their charges, they gradually raised them to levels matching or close to those of Safaricom.

Airtel Kenya, which was behind most of price reductions in the past, uncharacteristically adopted a per second pricing mechanism last August where the longer you talk, the lower the cost.

Calls on Airtel now costs between Sh2.40 and Sh4.02 a minute, also shaped by peak and off-peak timing. Yu Mobile, on the other hand, charges an average of Sh3 a minute on default tariff.

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