Safaricom, Kenya’s largest mobile telephony operator has slashed its international calling rates by almost 90% in an attempt to protect its market share after its competitions made similar drops in a move that looks set to further pile pressure on its profitability.
Safaricom reduced its international call tariffs to US$0.04 a minute from US$0.31 for calls made to USA, China and India, putting it at par with rivals Zain, Orange and YU.
Zain Kenya bowled the first round by reducing its international tariffs by 70% to US$0.04 per minute on October 1 to be followed by Essar’s Yu that reduced it’s by 98% to US$0.03 a minute later.
Orange followed the suit and on October 7 lowered its charges for the three markets to US$0.04 per minute from US$0.10.
US, China and India accounts for the industry’s largest international traffic, making calls headed to these market a key battle front for the operators.
As per the Analysts, the move by Safaricom will not hurt its earnings significantly given that international traffic accounts for a smaller share of its revenues.
According to Eric Kimathi, senior research analyst at African Alliance Kenya, Safaricom must have taken longer to negotiate with the rest of international operators for a termination rates, but we don’t expect the international price cut to significantly affect Safaricom. The company must, however, protect its share of the market and be at par with the competition, and ignoring any front will be costly at this time.
Safaricom’s rivals have operations in other markets and this made it easier for them to cut the international tariffs speedily compared to the market leader which only operates in the Kenyan market.