Companies

Safaricom sheds market share as callers talk less

safcom

An Orange shop at Teleposta Towers in Nairobi. Recent data shows that Safaricom’s share in the number of minutes spent on voice calls dropped to 76.7 per cent from 88.27 per cent. Photo/File

Safaricom‘s reversed market share gains in the quarter ended September as rivals gained in a period that saw consumers talk less.

The latest industry data from the Communications Commission of Kenya (CCK) shows that Safaricom’s share in the number of minutes spent on voice calls dropped to 76.7 per cent in the period to September last year compared to 88.27 per cent in a similar period a year earlier.

Airtel’s stake increased to 12.5 per cent from 6.55 per cent a year earlier, Essar’s grew to 9.6 per cent from 4.58 per cent and Telkom Kenya’s grew to 1.1 per cent 0.6 per cent. This made Safaricom the only operator to shed market share.

The market shifts come in period when consumers made calls amounting to seven billion minutes compared to 7.1 billion in quarter three of 2011 on what is attributed to the review of calls rates by Safaricom in October 2011 by between 25 per cent and 30 per cent.

Its rivals Airtel and Essar also reviewed their call rates in December, ending an era of price wars and rock bottom tariffs that kicked in August 2010.

“Safaricom continues to have the largest market share by voice traffic since a large percentage of off-net traffic terminates on its network,” said CCK.

Safaricom subscribers called 5.3 billion minutes in the quarter to September compared to 6.26 billion in a similar period on 2011.

But overall, subscribers on rival networks talked less.

This is captured by the fact that it controlled a smaller subscriber base of 63.2 per cent of the 30.4 million callers’ relative to its voice traffic of 76.7per cent, suggesting that its customers talk more relative to its rivals.

As a result, the firm has managed to grow its profits despite having expensive tariffs relative to its rivals for the better part of the year.

This outlook, coupled with the recovery of the Nairobi bourse, has seen its stock cross the psychological IPO offer price of Sh5 this year to trade at Sh5.75 a piece at the close of trading on Monday. The share has gained 76 per cent over the past year.

READ: Safaricom share touches three-year high

“There is still a wide disparity in traffic volumes particularly on-net traffic among the operators. Safaricom Ltd contributes the bulk of the on-net traffic owing to its dominant market share by subscription of 63.2 per cent,” said the CCK.

The regulator’s data showed Airtel subscribers made 56 per cent of their calls to rival networks, leaving it with a heavy Mobile Termination Rate (MTR) bill.
The MTR is the rate operators charge rivals for handling their calls.

This disparity played a role in the recent review of tariffs by Safaricom rivals Airtel and Essar as they seek to earn more from cross-network calls.

The two raised their cross network calls by 20 per cent to Sh3.60 a minute, an admission of their difficulties in reducing the share of calls headed to Safaricom.

The review will see them earn more money from the wider Safaricom network, especially in the current environment of lower MTR, which was cut to Sh1.44 from the current Sh2.21.

This means that Airtel, for instance, will earn Sh2.24 on the 492.5 million minutes of calls that headed to rivals networks in the quarter to September amounting to Sh1.1 billion. Under the previous MTR and lower tariffs of Sh3 a minute it would have earned Sh389 million.

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