NSE caught in crossfire of telecoms price wars

Following Zain’s price cuts, the counter of the only listed telcom company witnessed massive activities raising the level of shares traded by over 350 per cent last week alone.

Given that almost 70 per cent of the firm’s revenues accrue from voice calls, the market remains cynical that the firm can quickly diversify her revenue base using her huge capital base and maintain the huge profits that reached the peek of Sh20 billion in the first half of the year.

It remains to be seen if the reduction in calling tariffs will increase the frequency of calls, thus compensating telcom companies’ loss of revenue due to a reduction in calling rates.

During the last quarter, the total number of mobile traffic grew by 19.9 per cent from 4.2 million minutes in the previous quarter to 5.1 million minutes.

This is an increase of 118.6 per cent compared to the same period the previous year.

Foreign players like JP Morgan, HSBC, and Alexander Forbes who control over 40 per cent of the stock market are waiting to see the strategy that Safaricom will adopt after the temporary reduction in price.

Any move by foreign investors will have an immense bearing on the direction that the bourse will assume this week since they are major players on the Safaricom counter.