Zain shakes telecoms market with rock-bottom call tariffs

The new face of telecom wars emerged on Wednesday after Kenya’s second largest operator Zain halved its voice call tariffs and cut the price of text messaging by 80 per cent across all networks.

Zain consumers can now make calls across all networks at Sh3 per minute tariff from Sh6 and send text messages at the rock bottom price of Sh1 from Sh3 (Zain to Zain) and Sh3.50 to other operators.

The move is being seen as Indian telecoms giant Bharti Airtel’s first salvo in the Kenyan market following its takeover of Zain’s Africa business two months ago.

The new tariffs leave Zain as the cheapest network in Kenya and signals Airtel’s intention not only to replicate its high volume and low margins business model that has defined its success in India but also the game-changing arsenal in the operator’s stable.

Analysts said the biggest statement Airtel is making with the new tariffs is to move mobile telephony from the high-tech services market and make it accessible to the masses.

The deep cut in tariffs is particularly being seen as Zain’s most lethal competitive advantage that its rivals Safaricom, Essar and Telkom Kenya will find hard to match.

Staying put in a price sensitive market such as Kenya is not an option either because it leaves Zain’s rivals with the threat of losing subscribers to the low cost service provider that insiders say has prepared a long term battle plan for East Africa’s most profitable telecoms market.

By setting its tariff at Sh3 per minute, Zain has positioned itself below Telkom’s Orange brand which charges Sh4 per minute for calls made within its network, Essar (YU) which charges Sh6 per minute and the market leader Safaricom’s Sh8 per minute.

Mr Rene Meza, the managing director of Zain Kenya, said the rock bottom tariffs are aimed at growing the subscriber base and market share, adding that it has been made possible by the drop in interconnection rates.

The interconnection rates — fees that operators pay their rivals for calls terminating in their networks — are expected to drop to Sh2.10 from Sh4.42 beginning next month giving the service providers headroom to adjust cross network tariffs.    

Cutting cross network tariff by Sh5 compared to the Sh2.32 drop in the interconnection charges is the clearest signal yet that Zain is keen on a price war, especially with market leader Safaricom.

“We don’t foresee Safaricom cutting its tariffs close to what we have done but if they do it we will cut ours further,” said Mr Meza.

In an apparent jibe at Safaricom, Zain’s new tariffs were introduced to consumers with a declaration that “Going green is not always the better option. . .”

Safaricom’s marketing slogan is “the better option and its official colour is green.”