Kenyan integrated telecoms firm Safaricom today introduces a new tariff. Far from the confusing days of multiple tariffs, Safaricom recently aggregated all voice-related tariffs to the single “Uwezo” tariff. Today, Safaricom makes a leap forward with the country’s first data-focused tariff, priced at Ksh. 2 per minute.
To make sense of the impact of this tariff. Think back to the internet as a large percentage of Kenyans were first made familiar with it, through the model that pioneered it’s growth and penetration in urban centres and had until recently remained the #1 means of connection to the internet, the cyber cafe.
The shift has taken place over the past two years and according to the Kenya Advertising Research Foundation’s (KARF’s) recent statistics (2010), over 60% of Kenyans access the internet from mobile phones.
KARF Q4 2010 Statistics. Research by Synovate.
To unpack that a little further, the emerging trend is that the first experience of the internet has become mobile. This still doesn’t rule out the cyber cafe as the mobile experience on feature phones still cannot replace the “full-qwerty-keyboard-got-my-flashdisk-upload-that-document-and-email” use of cyber cafes but as far as social networking and general browsing, the mobile is the device of choice.
If we look at the Communications Commission of Kenya’s most recent statistics (downloadable here) we see that Safaricom had not only prepared but made progress in this and as it stood last year, had 92% of internet subscriptions in Kenya, making them competitors to Internet Service Provider incumbents (not to mention their acquisition of several WiMax companies)
With the recent price war, the bread-and-butter of telecom operators (voice) took a hit as they had expected and projected over the past years. Airtel expedited matters and more recently this April, mobile number portability coming into play, the market has never been as competitive as it is now. The graph below shows the sharp dip that voice took towards the end of last year. 
Responding by creating a series of value added services and focusing on data and customer retention (including good work on Twitter & Facebook), Safaricom’s made several key moves over the past two years that have included a partnership with Opera Mini, where they began to offer 10MB last year for Ksh. 8 ($0.10) and from Opera Mini’s detailed periodical statistics we know that Safaricom is sitting on some fantastic insight on who their data user is, where they spend their time and what information they consume. We’d love to see it, Safaricom!
As far as market share goes, the price war had it’s effect, with Safaricom pegged at over 80% it may be said that they’ve only got market share to lose, but the current restructuring and preparation the NSE-listed company has gone through is certain to put them in shape to maintain their lead and profitability moving forward.
The Tariff, The IDEOS & The Recipe
Today’s announcement is fundamental for a number of reasons. It bridges the gap with the more price sensitive crowd, it gives power-users the ability to make more use of the bandwidth behind the Safaricom 3G service, especially with both fibre and satellite, it remains Kenya’s only 3G network and is as far active in major urban centres. The most active Kenyan cities as far as internet usage are:
Top 6 Most Active Internet towns in Kenya
- Nairobi
- Mombasa
- Kisumu
- Thika
- Nakuru
- Eldoret
Current number of data-enabled handsets: 5 Million
Current mobile internet subscribers: 3.2 Million
Daily users of the internet on the Safaricom network: 1 Million
Most Popular Internet Bundle: 600MB for Ksh. 1,000 ($12.50)
Done right they have the opportunity to change the way Kenyans conceive the mobile phone’s use and with the masses getting more familiar with the internet, gain greater revenue from more data and time spent online. Just to clarify, they won’t throttle speeds as people use the new time-based billing (this was the case the last time they tested a similar “unlimited” promotion.)
Similar to Apple (great case study from Harvard there), Safaricom has made a smart move into retail with over 30 Safaricom Shops countrywide. The Safaricom Shops are the exclusive dealers of, for example, the Huawei IDEOS. The IDEOS has done tremendously well. Safaricom subsidised the price to $100 (and bundling 600MB as well as Ksh. 1,000 of airtime.)
With a tariff like this and the penetration of targeted low-cost smartphones such as the Android-powered IDEOS which they launched in Kenya in late January 2011 and has already sold over 60,000 handsets giving them close to 50% market share in the smartphone market in Kenya in just under 3 months according to CEO, Huawei Kenya CEO Herman He. Another result of this is that Kenya is now leading Africa in Android usage, with the exception of South Africa. The IDEOS also has a 95% activation rate on the network meaning less users are actually switching SIM cards since it is common for most subscribers to have multiple SIM cards.
The Kenyan market is promising with over 5 Million data enabled handsets and 3.2 million of them being on the Safaricom network and targeted low cost feature phones such as the Kabambe 3G going for Ksh. 3,999 at Safaricom Shops they continue to lower the barrier to entry for the mobile web and push data as their main revenue stream.
It will certainly be interesting to see how competitors in the market respond to this news.
What do you make of Safaricom’s strategy and their latest tariff? Groundbreaking or another ripple in the pond?
looking at the recently announced Safaricom pre-paid unlimited data tariff; browsing speed 128kbps, 3G has no impact whatsoever; Am going to stick with Orange. Airtels 3G signal is now appearing on my cell phone in Nairobi just waiting to see their unlimited 3G offer