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!