Africa: No let up in Mobile Price Wars

By Eric sande

Monopoly in the telecoms industry seems to be a story long gone in Africa. States have embraced a competitive ground for the investors in this sector to reach out to their  markert niche. All though some seem to be enjoying economies of scale others are fighting back to retain identity in the market.In countries like Mauritus, Uganda, Egypt,Nigeria South Africa, Ethiopia and Kenya call rates have reduced to less than 1US cents per minute. But it is the Kenyan subscribers who are having a field day, with cross network calls being charged as little as US $ 0.037.

This is a scenario that is likely to be replicated all over Africa as mobile price wars take centre stage.

Bharti Airtel, the fifth largest telecommunications firm in the world, recently bought Zain which runs its network on a number of countries in Africa   and will be spending US$350 million in the next 18 months to re-position itself as a key player in the local scene.It has forced price and subscription numbers to become a game-change again.

Last month Zain , the second largest mobile operator in Kenya ignited a price war by slashing its tariffs by half. Its competitors had no option but to play ball. They equally halved their voice tariffs to the delight of consumers.  

Kenya’s airtime traders say there has been sharp drop in volumes since Zain fired the first low tariffs salvo, forcing other operators to follow suit. Experts are yet to figure out how far down calling charges can go without trimming excess fat from the operators’ bottom lines. But telecommunications experts caution that mobile phone operators are likely to experience reduced revenues and profits in the new wave of price wars, with customers the happier lot, but only those who win over customers for the long-term will make an impact.

“They can go down as far as next to nothing, so long as there are customers to be won. A look at Bharti Airtel in India shows that they are not averse to gritty price wars, and have been known to engage in prolonged ‘survival of the cheapest’ price wars in India,” said Peter Wanyonyi, an IT consultant.

Mobile phone users will be the biggest winners with the dramatic lowering of tariffs already being witnessed. The lesson here is not how the price wars will benefit consumers, but that the market regulator can have a positive impact without resorting to arm-twisting. The low tariffs have significantly extended the time that consumers take before they are back to the shop for a top up – cutting trading volumes by large margins.