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Understanding telecom consumer habits in Kenya

Stefano Virgilli
Stefano Virgilli

Telecommunication operators have become increasingly more conscious about market shares and profit being eroded. As we all — globally — used to be closely dependent on high profit making tools for telcos, such as phone calls and SMS, the new enslaving route for addicted clients is data. We are hooked to our phone day in and day out, almost 24/7. We consume data like never in history.

Through social media, entertainment and video games, our routine has become so deeply interdependent to the availability of mobile data.

It seems yesterday to me, when I saw one of the websites that I was managing for a client, the incoming traffic from mobile exceeding the one from computers for the first time. It was a shock back then. It is perfectly accepted, today.

In Singapore a “telecommunication tsunami” took place recently. Since I moved there in 2006, there were only 3 operators. I will call them by their colour: The red one, the green one and the orange one. For the longest time, when it came to pricing, they had somehow found a market balance. Getting 1Gb data across the three operators was priced in the range of SGD 30 with no particular discrepancies. One could have costed SGD 2 more, and the other one SGD 2 less, but all quite aligned. Until new operators entered the market.

When the blue operator started offering very affordable price for data, users switched in mass. The 3 original market leaders found themselves caught by surprise. Initially they did not react and just observed.

But as the surge of customers continued, while seeing the green telco beginning a retrenchment actions, all the telcos realised that they could have not survived long (or at least with their current telecommunication sector within the holdings) thus they gave in.

Today with the same SGD 28 that I would have spent a year ago for a mere 1Gb of data, I can buy a whooping 6Gb from the same operator on a prepaid card.

A totally unforeseen 600 per cent benefit for the consumers, but how much would it cost to the telco to provide such added value? If the cost is high, then how badly would it affect the business moving on? If the cost is low, why was it not given to the consumers before the competitors came in to scare the market?

But the telecom business model does not work the same in every country. In fact, while Singapore has a rooted believe that a post paid contract is the way to go, in countries like Kenya, where mobile usage has boomed in recent years, still there is a negligible percentage of users that would sign up for a contract. Kenya has just reached 109 per cent SIM distribution with an outstanding 52.2 million SIM cards, and almost 2 out 3 belongs to a Safaricom client.

Despite the dominance of the market, Safaricom has actually lost quite a significant portion of the market. The absolute number has of course grown overall, in fact now 95 per cent of Kenya has network coverage.

Back in 2010, Safaricom only had 16 million SIM cards, which has now doubled to 32 million. However when we look at percentage, numbers are really different.

On Q2 2017, Safaricom had a dominant control over the market with 3 out of 4 customers, at 76.3 per cent. According to the latest report of the Communications Authority of Kenya (CA), Safaricom is now down at 63 per cent. Still quite dominant, but from 3 out of 4, to 2 out 3, the drop cannot be ignored.

The market is rewarding the aggressive advertisement and engagement of Airtel, which increased market share from a timid 9 per cent in Q2 2010 to snatching 1 client out of 4 in Kenya, at around 25 per cent.

But Airtel is not the only competitor to Safaricom. Although the other 3 telco players in the country are also losing market share to the bull run of Airtel, collectively they still retain around 12 per cent of the market, namely: Telkom Kenya at around 8 per cent, Finserve at around 3.5 per cent and the rest of the market to Mobile Pay.

The battleground for the future of telecommunication will be gravitating around the ability to stay competitive and relevant with the latest technology and services.

In Uganda, with a similar demography, telecom operators earn clients based on their ability to deploy and deliver e-money services to the users. In fact, the entire region of the East Africa has one of the lowest ratio of bank accounts and one of the highest velocities when it comes to mobile payment. One more established avenue for the telco operators to pocket additional revenues.

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