Mobile price wars spell boon for outsourcing firms

The business process outsourcing (BPO) sector is seeing growth in the domestic market, driven by the massive drop in call tariffs as telecoms firms engage in price wars.

“Since the price wars began last week, we have already signed two domestic clients — a bank and an insurance company — purely because the telecommunications charges now make sense,” Mr Nicholas Nesbitt, the chief executive of Kencall told Business Daily.

Zain last week made a permanent cut on its tariffs by 50 per cent, allowing subscribers to call across all networks at three shillings, a move that was soon replicated by Yu.

Taking cue, Safaricom also issued an offer that has seen its non-net and off-net tariffs start at two and three shillings respectively.

On Wednesday, Telkom Kenya introduced a permanent record low on-net tariff of two shillings and revised off-net charges by half to four shillings.

“It is still more than twice as expensive for us to call domestically than for us to call a client’s customer in the UK, but things are suddenly looking much better. Historically, our domestic clients would pay more for the telephony charges when they outsourced work to us than they paid for our staff time. That was ridiculous,” Mr Nesbitt said.

He added that the firm’s phone bills — and in effect the fees billed to clients —are expected to drop by at least 60 per cent.

“The phone bills were typically about five to 10 per cent higher than the cost of labour,” he said.

International calls have remained comparatively cheaper as they are routed through satellite or fibre networks, costing between Sh1.20 to Sh1.50 per minute to call landlines in the US and UK and a little more to call mobiles.

The BPO sector relies more on foreign clients, with local companies citing lack of a data protection law and high costs of outsourcing as impediments to channelling some of their daily operations, including customer service to BPO firms.

One key advantage of outsourcing is that it affords a company the opportunity to focus on its core business and potentially save money in the process.

Safaricom, Kenya Commercial Bank, and other large companies have invested millions of shillings in in-house customer service departments, also known as captive BPO in industry speak, denying the BPO players some of the most valuable deals.

Analysts say that banks, for instance, fear litigation that is likely to come with disclosure of customer information.

They argue that even with the passage of the data protection law, banks may only outsource less sensitive processes like loan applications.

“There is a bit of concern with regard to quality of services offered by local BPO firms,” Mr Eric Musau, a financial analyst, said in an earlier interview.