Thursday, January 20, 2011

The Tariff Wars in Kenya: Is it a Blessing or a Curse??


Kumbe Lumiti u love the reds n u pretend u hate Airtel
Dan Muhuni(daniel@prestigekenya.com)
As i write this i would lyke to apologise to my dear friend Cedric Lumiti (Safaricom’s pr chap) n the only lead singer kwa niko na Suffering com ooh Safaricom whose blood has eventually turned from red to green. Reason he can’t be associated by the red na sii ya Man United but ya Airtel that a common mwananchi is celebrating with.
Lumiti am not writing this to make u happy or to praise Ginadin or ati coz we worked together n that u taught me how to edit an ICT story back in Kenya Times ama ati coz u sponsored my lunch @ the Laico Regency juzi na ukaninyima simu. Noooooo but its coz of who you are to me n to try n easy the blood pressure of the Safaricom Limited's CEO Bob Collymore who knows very little about PR. U rem he recently shamelessly exposed Safaricom in front of an East African TV?. Lumiti I know Safaricom pays ua bills
Picture this my friend Lumiti n ua fellow Ginadin community

KENYA is currently experiencing euphoric waves brought about by the tariff war between the two largest telephone networks, Safaricom and Airtel. With the regulator backing the lowering of calling rates, the going cannot get better for Kenyan consumers! Airtel  has already kicked off a price war with just announced unprecedented low and permanent new tariffs call rate to Sh1 for its subscribers within the network, Sh3 to call and Sh1.00 per SMS message to any mobile network in Kenya.
This huge price reduction caused such a storm of traffic on Airtel's network; they actually had connectivity problems with other mobile phone companies. making it the cheapest network from which to make calls to other networks. Apart from that, the short messaging services rates also went down musically...

Initially, Safaricom used to chest punch that it cannot really reduce its calling rates to as low as Airtel's because businesses are started to make profits.  The new Safaricom CEO, Mr Bob Collymore early this week said its unheard off that our competitor is coming up with prices that we cannot afford to match up with. “to be sincere we have more that 1300 employees in our call centres and we have some other employees who work with us and we cannot match up with what our competitor is offering since we have to pay our bills”
Lumiti n ua Ginadin colleagues mimi sikatai but tariff wars are good when you look at it initially. There people who benefit in these wars, paradoxically, are the consumers. I say paradoxically because it is said that when two bulls are fighting it is the grass that suffers but in this case, the grass is all smiley and beaming with joy, hoping and praying for the fight to continue until the rates drop to almost nothing! Aren't we all happy! This is a good thing for Kenyan consumers, right? ....I am not really sure.

Safaricom Limited's CEO Bob Collymore recently pointed out that businesses are started to make profits. Such a capitalistic, selfish utterance! Most of us would think. But let's look at this statement closely. When businesses are profiting, everyone, the owner included, benefits. Let me rush to assure you that I am not for Safaricom's exorbitant charges; not at all. All I am trying to tell us is to look at the bigger picture of this tariff wars.
Lumiti I have done some home work that you gave me n I have tried and focused on India mobile companies model on calling rates, where Bharti is a major player. The price wars were so severe, that the whole industry was led into making losses just to keep the numbers. The chief players are now trying so hard to reverse this effect, but they are yet to come to an agreement. This is where my discomfort lies. A whole industry being pushed into becoming a loss-making machine just because everyone is a little excited about having the most numbers. While they make the losses, the consumers benefit, right? Wrong. So much escapes the simple eyes of those cannot see the scenario for the ugliness it is. Walk with me as I take you through my limited knowledge.

1. Quality
With more numbers and only prices being as the only competition tool, then the quality of services and products dwindles. Why would we provide state of the art services and yet they are paying so little? So, we give them the value for their money. I know most people don't really care about quality of products and services. They would rather have pathetic services and products, and pay less. But let us think about this again. The amount of resources we lose as a result of poor services is horribly huge. Calculate all the time used to queue, to get a call connected, to get a response to a query, to access a center for services, etc. That time could have been used to do other beneficial things, more economic valuable activities. As we waste the time, we waste the money!

2. Innovation
When a company is doing well, it is able to retain some money for growth and innovation. I can imagine that if Safaricom had been making losses through and through they would not have been able to come up with MPESA, MKESHO, PESA PAP, etc. Most of these services and innovations we take for granted, and we don't pause to think how much time, money and energy was put into them to make them a reality and thus make our lives easier. Without revenues, then all the innovation and creativity comes to a screeching halt, because companies are busy fighting to survive.

3. Employment
When companies will start making losses, then they will try to take all measures to cut costs so that at least they are able to retain themselves. This will lead to drastic measures being taken like retrenchments, reduces purchases, out-sourcing, etc. This will lead to unemployment, which leads to frustrations, rise in insecurity and slums, chaos and riots because of idleness, the political stability is interfered with, which affects the country's tourism, country rating for loans, stock markets performing poorly...the list could go on and on.

4. Economic Growth
All the companies pay taxes to the government, and therefore when a whole industry dives into loss making then the government loses so much revenue in terms of taxes. This leads to reduced government spending thus lower money circulation in the economy. The business enterprises which would normally benefit from the government spending receives less revenues, leading them to retrenching some employees, leading to unemployment...and the vicious cycle is repeated once again. With low economic growth, infrastructure, hospitals, schools, etc, are all affected.

5.Capital Loss
Most of Kenyans are shareholders of Safaricom Ltd. Should the company start making losses, then their share prices start going down. A share you bought at Kshs. 5 will be going for Kshs. 0.87 (worst case scenario). All the shareholders will be the losers here.
  
I could go on and on, about how a failed industry can affect all of us at large... what with brain drain, restlessness among the youth due to unemployment, shocking poverty level, imperialism of the 'haves', etc... So, as we celebrate the tariff wars and price cuts, let us also pray and hope at the back of our minds that the telecommunication industry in Kenya will not be what it is in India. We will be sacrificing so much, in the name of making cheap calls.
Lumiti n just know ur not Lucky samaki kwa mama Oliech lazima utanunua leo. Nkt!

Tuesday, January 18, 2011

Safaricom houses along Waiyaki way to be demolished in 6 months. "Sufferingcom"

New Safaricom house 2 be demolished in 6 moths time
By Dan Muhuni

Safaricom Limited are among several companies whose multi-million shilling buildings have been earmarked for demolition under a compulsory acquisition programe by the government.The government has announced intentions to acquire land where Safaricom's two sites on Waiyaki Way stand for purposes of a road expansion project.
A safaricom employee who seekd anonymity  told us on phone that Safaricom is bn targetted. We are vey sure that Airtel is part of this since they have had  internal secret meetings and agreed to use all means possible to finish Safricom.  “Inside source from Airtel tells us that even the president is aware of this since Airtel had a closed door meeting with the president and the prime minister just days after they arrived in Kenya” Said he: Tunaomba serikali ingiililie kati na kutupa suruhisho la kudumu. Hahahhahaha  

In a Gazette Notice dated December 31, the Ministry of Lands announced it would acquire various parcels of land of varying sizes on both sides of Mombasa Road and Waiyaki Way.

The government said it intends to acquire the land in order to expand the road between the Jomo Kenyatta International Airport through to Museum Hill and Gigiri.

In a quick rejoinder, Safaricom Limited's CEO Bob Collymore said the company does not own the buildings they operate from and would be negotiating with their landlords to get a practical solution.

"Safaricom is not in the business of brick and mortar and as such, we do not own any of the sites from which we operate," Mr Collymore said in a statement.

"We are in touch with our landlords and the authorities with a view to working out a practical resolution."

The two buildings on which Safaricom operates from are not built on a road reserve but the government has indicated it will be invoking the section of the law that deals with compulsory acquisition to use it for a road expansion project.

Under such arrangement, the government compensates legitimate owners of the land as per the current market value of their property.

The statement said a consultative meeting of key stakeholders convened on Tuesday had resolved that "such action is arbitrary, autocratic and smirks of an attitude of a Government that does not care about private investments."

"The stakeholders expressed shock and disbelief that a democratic government can adopt a high-handed approach of unilaterally announcing an intended compulsory acquisition without due regard to a consultation process," the statement sent to newsrooms said.

They said that the parcels of land in question constitute private, legally acquired assets and not any land earmarked as road reserve - a fact verifiable by the absence of a caveat in Ministry of Lands records.
SAFARICOM opinioned: "Those charged with the responsibility of design and development of the country's road master plan have failed in their duty, care and professionalism to plan for workable solutions consistent with best international practices and have elected a draconian option that amounts to destruction of tens of billions of shillings worth of investment and loss of thousands of jobs."

Safaricom believes that their businesses are being targeted because "It is apparent from the road design that the routing could have been influenced by other factors that amount to a conspiracy to target specific businesses as evidenced by the inconsistency in the width of expansion and where the road begins, besides lack of transparency in the project design."

Safaricom seems not to be lucky this time round after the massive customer exodus to the cheeper n more clear Airtel
End...............

Monday, January 17, 2011

Safaricom Warns Tarriff cuts could cripple industry

New CEO of Safaricom, Bob Collymore
By Dan Muhuni

Kenyan consumers are rightly excited that the mobile phone company Airtel, now owned by Bharti Airtel, has kicked off a price war with just announced unprecedented low and permanent new tariffs call rate to Sh1 for its subscribers within the network, Sh3 to call and Sh1.00 per SMS message to any mobile network in Kenya. This huge price reduction caused such a storm of traffic on Airtel's network; they actually had connectivity problems with other mobile phone companies.
Safaricom, the dominant mobile phone company in Kenya, in other hand is owning up to the mobile phone tariff wars warning Kenyans that the tariff cut could cripple the whole mobile telephony industry in the country. Speaking in an exclusive interview with Dan Muhuni, the new Safaricom CEO, Mr Bob Collymore said its unheard off that our competitor is coming up with prices that we cannot afford to match up with. “to be sincere we have more that 13,000 employees in our call centres and we have some other employees who work with us and we cannot match up with what our competitor is offering since we have to pay our bills” added Collymore................... more of this catch up with my weekly ICT  column in your favourite newspaper................daniel@prestigekenya.com