Airtel gambling with YuMobile subscribers

Written by
  • 7 years ago
  • Posted: March 5, 2014 at 12:56 pm

By now you must be aware that YuMobile is exiting the Kenyan market shortly after celebrating its 5th anniversary. The exit to be finalized in three months time will see Safaricom takes over Yu’s infrastructure and 130 technical employees whereas Airtel will take over the subscribers and the prefix. The total deal amounts to roughly Kshs 8.6 billion or $100 million.

It is sad that the mobile company that managed to bring stiff competition to the market leading to price wars hence the current low call rates both on net and off net in all major players will exit the market technically allowing the two bitter rivals – Safaricom and Airtel – to once again take over the telecommunication industry.

But Yumobile has itself to blame for its exist. Yumobile ought to have known that basically humanity doesn’t prefer cheap (actually valueless) commodities. There is a joke of an old man who wanted to dispose of his washing machine. He left the old machine in the street outside his apartment for days hoping that someone would carry it along. But after several days, no one bothered to give the machine a glance. Later his grandson advised him to put a “For Sale” sticker. The following morning after the sticker was put, the machine was gone!

Yumobile entered the market with a lot of freebies – free Yu-Yu calls, free texts, free Facebook, cheap daily Internet, etc etc until Yu was associated with cheap life, cheap style – Yu became a line associated with high school and college kids. There was a time my brother posted something like this on his Facebook page, “Those chics inboxing me their mobile numbers, just be sure the number is not a Yu-line – I don’t do cheap chics”…and so people shunned Yu lines.

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The shunning of Yu lines has led to Yumobile registering losses to the tune of 3 billion shillings year after year; until, despite having spent over 35 billion shillings in setting itself up, Safaricom and Airtel are willing to offer only 8.6 billion shillings for the infrastructure, employees, and subscribers combined. But these sad facts are not of my concern today. My concern is Airtel’s portion of the deal – purchasing Yumobile subscribers.

By early this year CCK’s statistics indicated that Yumobile had 3,003,298 subscribers a number that probably has reduced. Recently media reports show that Airtel is buying 2.7 million subscribers from Yu as part of the deal that will see Safaricom take over Yu’s infrastructure. Safaricom’s part of the deal is straight – they are going to pay for existing and working infrastructure but what does Airtel intend to gain from acquiring Yu’s subscribers?

The answer is also clear. They want the customers who will spend on their products and services hence help them generate more revenue. There is a big BUT on Airtel’s part though. Who told Airtel that the Yu subscribers will be willing to stick to them and not opt for any other network once the deal is done? Anecdotal reports indicate that most Yu subscribers have more than one line – and most of their second lines are actually Safaricom lines. The reason Safaricom customers have alternative Yu lines is simple; they use Safaricom lines to receive calls and also to operate services like M-PESA but prefer to make the cheap Yu calls. When Yu shall exist the market, from simple logic, it is easy to see that the Yu subscribers will either dump their Yu lines and retain the primary (Safaricom) lines or opt for the operator that has services that closely matches Yu’s cheap rates – and that Operator is not Airtel.

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This is the scenario: once Yumobile exits the market, Yu subscribers will (one morning) wake up to the realization that their phones are showing “Airtel” instead of “Yu” as their network provider. Most of these subscribers, out of madness and anger, will discard their Yu-Airtel lines. Some of them will opt to buy second lines probably from Orange or Safaricom and a few will opt to just buy the ‘original’ Airtel lines. A few will remain with Airtel though. I wish I could quantify the number of those who will remain loyal to their original Yu lines but I can guestimate that more than 75% of the 2.7 million subscribers will ditch Airtel after Airtel has paid the hundreds of millions to Yumobile.

What a gamble by Airtel.

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