Ratio Magazine :: The Inside Track to East Africa’s Economies - Kenya: Press Releases: Safaricom Statement on Zain’s New Pricing Strategy

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Kenya: Press Releases: Safaricom Statement on Zain’s New Pricing Strategy

Friday, 20 August 2010

The move by Bharti to reduce its Kenyan operation’s voice tariffs by 50% is an unsustainable pricing strategy. Zain (Bharti) seem to be banking on the Indian model of low tariffs and high volumes to increase MOU in a market with an elasticity of less than 1. Safaricom has no intention of getting engaged in a similar pricing strategy that would undermine our business and erode value for our shareholders. Safaricom will launch aggressive promotions to limit any market share gain by the competitors and at all times protect our revenue share. Reduction in MTR’s to KES2.21 will not have a significant impact financially on Safaricom as we are net receivers of off-net calls.

Safaricom has moved away from being a pure voice player to a total communications provider. We have always assumed that voice would move to be a low cost commodity and therefore we embarked on extending our offerings. We had provided for a reduction in tariffs as well as heightened competitor activity in the short term in our forecasts and in our discussions with the investment community in the past year. And to this end, we have amplified our focus on cost efficiencies across the board and will continue to do so going forward. Expectations on EBITDA margins are still within the guidance we have provided to you and we should maintain it at the same level as last year’s. Our data strategy continues to gain traction as well as M-PESA which is growing from strength to strength.

Safaricom has invested significantly in its network, having spent KES139bn since inception – more than any other operator in the country. Over the past two years, we have invested significantly in our data network; fibre, 3G and Wimax. Safaricom is the only operator with a 3G network with over 600 3G-enabled and 140 Wimax base stations and a mobile money product that contributes positively to EBITDA margin. We are committed to our continued investment in our infrastructure to leverage on our strengths. Data combined with M-PESA will ensure that we will continue to benefit from the growth that we see in the Kenyan market.

We do expect that there will be some volatility in the market place, but we firmly believe that Safaricom is in a significantly better position to weather this volatility than our competitors.

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