Consolidation in the mobile telecoms market
After more than a decade of cut-throat competition, the telecommunications market is consolidating. Were it in stock trading, we would eerily call this a correction; the situation where, after a bull or bear run, share prices tend to find their right values.
Safaricom has been more successful in the mobile telecommunications market, and has held the crown of the most profitable business in this region for a number of years now. There’s no sign on the horizon of a near rival, not even from banking. Airtel is a very distant second. Then, of course, there is yu Mobile and Orange, aka Telkom Kenya.
The last two are exiting the market, after failing to get the critical mass. It’s a tough market, and even more frustrating when hardworking firms can’t ride the mobile telephony boom while others are having a roll. Anyway, that is stuff for market and investment analysts to unravel.
The exit of yu and Orange is good and bad. The bad side: if you have been watching the telecoms market for the last seven or so years, you haven’t missed the fact that these two operators have played a significant role in shaking the market in favour of consumers. Safaricom and KenCell SIM cards used to cost Sh2,500 apiece and calling per minute upwards of Sh50. Sending a text was an expensive affair.
Yu and Orange broke the duopolistic hold of the two main rivals on the market by giving Kenyans more options in calling and also help segment the market into corporate, youth and mass. That’s why consumers should be mourning the exit of these two consumers because, as they will learn to their sorrow, it throws the market back at Airtel and Safaricom. Nothing can stop these two from raising rates again, especially so for Safaricom, which will have a more dominant grip.
The good in these exits is so little, and could very well rely on luck. It clears the market of laggards and opens the ground for more competitive players to come in and give the old boys a run for their money. This would give the market a new round of shake-up and finally liberate consumers from high costs of data and money transfer services, which are the current growth areas. Let the government finds replacements for yu and Orange.
And talking of competition, what do you make of the licensing of three more players into the telecoms market? Equity Bank through Finserve, Mobile Pay Ltd owned by Tangaza Money, and ZionCell have been given the Mobile Virtual Network Operator (MVNO) licences. MVNO licences fall under the Application Service Provider (ASP) category, which enables an entity to offer services such as customer registration, SIM card issuance, billing and customer care without holding a spectrum licence.
This creates a new front in the battle for control of mobile money and data services. New entrants have a headstart as they will ride on the existing infrastructure of the mobile operators, at a fee of course, saving them heavy investment in rolling out telecommunication networks.
Having new players join the industry is one thing, and getting them offer the needed competition, in terms of quality and pricing, to balance the market is quite another. Mobile money service is firmly with M-Pesa, while data is shared with ISPs. It will be an upriver task to wrest these markets from established players. Equity and group will likely play the under-pricing card. But they have to offer very low prices to attract the attention of customers currently hooked to Safaricom and Airtel, which may not be shaken an inch.
The threat for these new arrivals is themselves. They will likely create their own very small market segment and viciously fight over it. After sometime, just like it has happened in the larger mobile market, one or two will be eaten up. That’s why consumers should not expect too much from them.
Equity might cause a stir in mobile banking by consolidating its market, and leveraging on its expansive branch network and agencies. If it can come up with a revenue-generating product for its over eight million account holders, it can cause some disappointment. That tells you the mass market called Kenyans as we know is is hard to grab. Finserve, Tanganza Money and ZionCell must come up with exciting niche products and not a replica of M-Pesa and M-banking services that we already have.
If you disagree, look at what happened to mobile number portability. It was billed as a game-changer, but was turned on its head by strong loyalty among mobile subscribers and the option of having two SIM cards, or three in some cases. But will Kenyans be willing to add third, fourth, fifth and sixth SIM card? Don’t hold the line for that.
The writer is the managing editor of online news portal www.businesstoday.co.ke Email: lmulunda@businesstoday.co.ke
