Strategy Analytics’ Teligen service recently highlighted the fact that Kenya has by far the lowest mobile rates in Africa, three times lower than neighboring Uganda.
I spent most of last week in Kenya conducting research. When I landed I bought what I thought was a modest amount of airtime from Safaricom – about US$14 – but I failed miserably to exhaust it, even making multiple calls back to the US. So yes, it really is pretty cheap to use a mobile phone in Kenya.
But that may be changing, at least a little. On September 30, having telegraphed the move for some time, Safaricom raised all its domestic voice tariffs by 1 shilling (KES) per minute (1 KES equals roughly 0.01 USD at the current exchange rate) to 4 KES on-net/5 KES off-net.
With market share just north of 70% and the admirably sticky M-PESA mobile funds transfer service – enthusiastically endorsed by 100% of the taxi drivers I spoke with – Safaricom can probably make this rate hike work.
- The actions of other operators will be interesting to see. The local Essar operator, yu, recently launched free voice calling during daytime hours, so they don’t exactly appear to be in a revenue maximizing frame of mind.
Safaricom has been arguing for some time that rates are unsustainably low, and certainly insufficient to expand coverage further into rural areas, as the government would like it to do. But bringing the issue to a head right now is the soaring inflation in the Kenyan economy, as witnessed by the dramatic decline in the value of the shilling versus the US dollar.
The weakening shilling poses a number of problems for Kenyan mobile operators, not least of which is the impact on the price of diesel fuel for base station generators. A moderately sized generator could easily burn 100-150 litres of fuel a day, which means that the 26% decline in the value of the shilling since the beginning of the year adds a great deal to operators’ fuel bills, independently of movement in the global price of oil.
- Less than 20% of the Kenyan population has access to grid power, and those that do find that it is not always reliable – buildings seeking tenants routinely advertise their backup power capability. So it is no surprise that about a quarter of Safaricom’s base stations are entirely diesel powered, with others having diesel backup.
Even with Safaricom’s rate hike, Kenya will likely have the lowest costs on the continent for some time. But next time I might be able to burn through $14 in a week of international calling.
See "Renewable Energy Fuels Rural Network Expansion in Pakistan and Elsewhere" November 2009