Airtel shakes up modems market with price cuts

Telecom provider Airtel has slashed its modem prices by over half as it seeks to grow its market share in the mobile Internet sector dominated by rival Safaricom.

Airtel is now retailing its 21 megabytes per second (Mbs) modem at Sh1,999 down from Sh4,500 while the 7.2Mbs modems will go for Sh999, a 50 per cent drop.

Airtel is placed third in the mobile data sector — after Safaricom and YuMobile—with a 10 per cent market share as of December 2011, one they hope to increase.

“Airtel has a commitment to offer its customers affordable superior quality communication and service and the promotional offer on the modems is a demonstration of this proposition,” Airtel Kenya’s managing director, Shivan Bhargava said .

The move by Airtel to lower its prices is likely to shake up the pricing model of the portable devices as operators jostle to attract more subscribers to their service.

Once activated a modem can only be used on the particular provider’s network and offering a lower price is one way of attracting new customers—who are often keen on initial set up costs. Already, Airtel’s new prices are significantly lower than that of its rivals.

Safaricom, whose mobile data market share as of December 2011 stood at 77.1 per cent, has a 7.2Mbs modem going for Sh1,999.

Its 21Mbs modem on the other hand costs Sh9,999 and comes bundled with 20 gigabytes of data.
Fourth-placed Telkom Kenya is selling its 3G+ 3.1Mbs modem retailing for Sh3,999 while its 21Mbs device is going for Sh1,999.

The mobile Internet market has in the past year become important for the mobile telephony firms after a vicious price war cut earnings in the voice segment.

As a result, the operators are increasingly looking to the data market for growth in earnings, trying to outcompete each other in pricing, bandwidth and the speeds that they offer customers.

This is largely a result of the laying of an elaborate inland fibre optic network in the country, increasing the bandwidth capacities available.

Data from the Communications Commission of Kenya (CCK) show that 17.3 million Kenyans had access of the Internet in the period to December up from 14.3 million in September 2011 — pushing Internet penetration to 44.12 per cent from 36.3 per cent.

The statistics further show that mobile Internet subscriptions on GPRS/EDGE and 3G recorded the highest portion of the total Internet subscriptions of 6.07 million subscriptions compared to 5.37 million subscriptions recorded during the previous period, a 13 per cent rise.

Yesterday, Orange unveiled a 3G Wi-Fi router targeted at the small and medium sized enterprises (SMEs) market allowing 20 users to access Internet wirelessly at the same time.

The device is retailing at Sh36,950 and comes with an internal billing system that enables tracking of the time and volume of data spent by each user.

“Despite the sector contributing to 18.4 per cent of the country’s GDP and employing over five million people, the SME sector continues to experience constraints that include limited access to information and technology,” said Telkom Kenya CEO, Mickael Ghossein.

-pmutegi@ke.nationmedia.com