The planned Airtel-Telkom merger is likely to trigger a tariff war in the telecommunications sector as the new entity is likely to opt for a low-cost pricing strategy to attract a larger customer base. This is according to research firm Sterling Capital which in its latest market report points to a looming price war between Airtel-Telkom and Safaricom.
This means Airtel-Telkom will have an opportunity to take the risk of lowering tariffs to woo new subscribers without going further in the red.
“Recent tariff reductions by Safaricom particularly on mobile data emphasises the impact that price competition has on subscribers. We had previously stated that the possibility of Airtel and Telkom lowering their tariffs further as separate entities to woo new subscribers was low as it would push their faltering businesses further into loss-making territory,” said the research firm. In October, the research firm had reported that Safaricom’s pricing power in the voice and mobile data business lines had been falling over time owing to price sensitivity of its subscribers who could easily use pricing as a basis to switch their service provider.
The fresh report also notes that a new mobile money service by Airtel-Telkom, if established, is unlikely to challenge M-Pesa’s dominance in the market owing to the mobile money service’s strategic business partnerships and reach.
Latest Communication’s Authority of Kenya (CA) statistics indicate that Safaricom has 162,800 agents equivalent to 74.5 percent of total share of mobile agents.
