Celtel-Zain-Airtel and Yu have tried this David vs Goliath price war against Safaricom without success. By August last year Airtel gave up on the price wars and increased their talk time pricing to leverage on the losses they incurred from the price wars. In the articles Airtel Missed the point with price wars and the recent one on Orange vs Safaricom – let the war begin we outlined several factors that made Airtel lose on the price wars and why we think Orange is the underdog in the war against Safaricom.
Generally the price wars were able to let consumers save a lot on communication down from Shs 10 per minute to currently high of Shs 4 per minute on talk time. Text messages also dropped from Shs 5 per text message to the current standard Shs 1 per text message. Customers have also been enabled to save on data. Due to the price wars, Kenya was able to drop from being one of the most expensive countries to communicate in using mobile phones to being one of the cheapest countries in mobile communication world wide.
But customers are yet to reap the full benefits of a true competitive market. Safaricom, being the market leader with over 80% market share by customer base and having more than 100% industry’s profits (last time I checked all the other telecos were making losses), has technically monopolized the mobile telephony market in Kenya. Safaricom’s monopoly means there is little choice customers have when Safaricom cannot deliver in service quality.
The lack of choice on the part of customers has been witnessed on three major occasions. Last year CCK rated Safaricom the worst performer in key areas that included dropped call rates, network quality, pricing of services (Safaricom was the most expensive network) and others yet it still witnessed the highest customer growth rate. A few customers who ran away from the network to the rivals found themselves going back to Safaricom after being dissatisfied by the services offered by the competition. A critical service that is excellent in Safaricom but lacks in the other networks is reliable customer care service.
The other occasion that would have led to mass exodus of customers from Safaricom to the competition was when Safaricom decided to increase talk time charges from Shs 3 per minute to Shs 4 per minute at a time when competition was dropping their call rates from Shs 3 per minute to Shs 2 (Airtel and Orange) or even Shs 0 per minute (Yu). But again, almost no one ran away from Safaricom.
Lastly Safaricom decided to increase mobile money charges and even introduced different rates for sending different amounts of money from the previous flat rate of Shs 30. The rival networks on the other hand made it possible to send money for free across all networks but Safaricom lost nothing still; on the contrary, their mobile money have increased its contribution to total revenue from under 15% to over 17%.
These facts can make anyone grow horns. Someone in Safaricom could reason, “Even if we increase our prices, people will still come to us. Even if we don’t improve on our service quality but instead call CCK liars on their QoS, we are still loved. Why should we spend on infrastructure development to give the best quality possible? Let us just focus on customer care”. To avoid the possibility of Safaricom growing horns (I’m not saying they couldn’t have grown horns already), there is need for Orange to win the new war against Safaricom.
Orange winning means there will be a strong player in the market that can keep Safaricom in check. Personally I’ve been forced to accept the constant out of service Safaricom’s Internet services simply because there is no better option. There can’t be a better option if the other alternatives in the market don’t get a dime from the market to give better services. Although Safaicom takes home more than 100% of the industry’s profits, their services still fall below minimum standards on various quality metrics. We need someone like Orange to have a significant share of these profits so that Safaricom (and others) can be forced to improve on its services across the country.
For Orange to win the war, it needs to win three major battles. 1. Orange needs to enable the masses clearly appreciate the logic in their current aggressive ads against Safaricom hence opt into their network. This is the logic: if someone spends Shs 3,000 per month on talk time on Safaricom, Orange offers to enable them save 25% of that cost so in a month the same person is in a position to save at least Shs 750 on talk time with Orange.
The second and probably most important issue that Orange needs to address is network strength and quality. Is Orange’s network capable of maintaining even half of Safaricom’s customers without network glitches? The masses may move, but for how long will they stay in Orange without facing network down times, increased dropped call rates, delayed connections and Internet unreliability? If mass exodus happens the way Orange hopes it should, then they must be ready for mass exodus back to Safaricom within weeks due to poor network services.
The third and equally important metric that will determine the ultimate win is customer service. As many people come into the network, Orange should expect increased calls, tweets, and Facebook posts to their customer care representatives. Is Orange ready to handle the increased traffic to their customer care lines and social media pages? Safaricom customers have become accustomed to receiving prompt help whenever they call on Safaricom’s customer care representatives. Any other customer care service that will fall short of Safaricom’s standards will be shunned and dumped.
Reliable, quality, prompt customer care service is the game changer for any network that wants to gain customers. A serious teleco will invest in customer care that is ready to be of service to customers way beyond the experience customers currently have with Safaricom.
So Orange, the ball is back in your hands. We might be ready to see the logic on the 25% savings; but are you ready to host us for a month, let alone eternity? I don’t think so hence Safaricom’s monopoly reigns.