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iHub By Jessica Colaco / August 23, 2010

Price Leadership – Safaricom versus Zain

1 Comment

Have the market leaders – Safaricom become price followers instead of price leaders ? Are Zain the price leaders with growing market share? How the tables have turned!!!

A market leader is a firm that has the largest percentage of the market in term of total sales revenue. They often dominate competitors in customer loyalty, distribution coverage, image, perceived value, price, profit, and promotional spending.

Last Wednesday, the Communications Commission of Kenya (CCK) slashed interconnection rates from Sh4.21 to Sh2.21, making it cheaper to call across networks.

Zain Kenya, recently bought by India’s largest mobile operator, Bharti Airtel, followed the move by slashing its calling rates from Sh6 to a flat rate of Sh3 per minute and Sh1 for SMS. Becoming the price leaders in this case.

Source: Bharti.com

Business Daily talked to Zain Kenya managing director Rene Meza on the strategies Zain intends to use this time round to sustain such a price war and the impact on the company’s business.

You have opened a pricing war in the voice market. Do you have the muscle to sustain it? -source – businessdailyafrica.com/

“This is a new business model that has been made possible by our new owners, Bharti Airtel, who also have a right mindset on what we can do and when. We are going to leverage on their economies of scale being the fifth biggest mobile provider globally, which should help us cut on our capital expenditure. ”

Where are the others – Orange and Yu? What are your views? Will Safaricom continue to be the price followers or will they retaliate to become the price leaders again? Only time will tell…

Author : Jessica Colaco

Jessica Colaço is currently the Director of Partnerships at iHub. She was the Founding Manager between 2010 and 2011 at iHub and the Research Director between 2011 and 2013 at iHub Research. She is passionate about Innovation, Research, Mobile and Robotics Technology and Mentorship and Entrepreneurship in Kenya as she uses her position at iHub to court local, regional and international stakeholders to adopt Kenyan-made solutions. She is also a Mobile and Robotics Tech Evangelist, Co-Founder of @WMIAfrica and @AkiraChix, @TED Global Fellow 2009 and upcoming Guitarist.


1 comment
  • wakabz at 13:01:45PM Monday, August 23, 2010

    i stand corrected, but i think the small print says the new interconnect is effective september 1st so as of now zain is subsidizing all calls terminating on safaricom platform to the tune of ksh.1.21.the bharti model is lease, lease, lease, so while safcom mite have to borrow to put up infrastructure, zain kenya fork out a bit of cash and does revenue share with the leasor, sort of like nakumatt and their shelves, etc….

    zain dont listen, 18 monthsago i got intotrouble at one press conference for mentioning to their pr gurus that they were confusing the customer, three new offers in one week!!!

    some one pointed out on twitter how their full page ad was next to a story zain was pushing for its 20 bob, offer it targets for students?…..

    one of the largest billboards in nairobi, it covers the whole of one side of afya centre, which is some some 20stories high still says zain 6 bob and 3 bob within zain… please….!!1

    Reply

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