By Jerry Okungu

THE other day, I tested to find out if it was true I could send out a text message to a Safaricom number at the cost of Ksh1. It went through. When I checked my balance, I found I still had Ksh2.20 in my Zain account worth two more texts!

Let me now confess one thing I have been doing in the last three years. Every time a new operator appeared on the scene, I bought its sim card in the hope that a price war would break out to my benefit. It never did.

At one time Zain could rip me off in the range of Ksh30,000 per month when I was foolish enough to sign up for postpaid service. Safaricom was never any better; never mind that it preached to us the gospel of the better option.

In Kenya, we only started seeing real price reductions when Orange and Yu appeared on the market. Modest as they were, they slowly started eating into the big players’ market until the big boys realised that their high charges were not sustainable in the long run.

When two weeks ago, the Communications Commission of Kenya reduced interconnectivity charges by 50% and Zain suddenly declared an open war on all network operators with their drastic 50% price reduction, it was swiftly emulated by Yu network.

Definitely this called for celebration for those of us who felt suffocated by high tariff charges. Now I am permanently on either Zain or YU for all my outgoing calls and text messages. I only use the other networks for incoming calls.

Should they attempt to charge me for incoming calls, I will dump their sim cards at the nearest dustbin.
In this war of price cuts, I would like to imagine how painful it will be for some operators.

With 17 million subscribers estimated for Safaricom and the other three million share among the other three, a mere 10% switch to Zain or YU would mean 1.7 million subscriber loss for the market leader in just a matter of weeks. Imagine the kind of revenue loss this would mean to the market leader!

However, assuming that Safaricom calls Zain’s bluff and reduces its call rate permanently from Ksh12 to Ksh3 per minute, Safaricom would be telling its shareholders that they should expect a fall in its profit margins by about 70% on its voice product purely on price structure alone.

The biggest challenge for Safaricom in this price war is not so much as a fight between David and Goliath. It is more about having been used to huge profits that have been rather exploitative to the ordinary Kenyan.

After 10 years of very little industry challenge, a weak regulatory body and a gullible market, Safaricom has exploited the ordinary Kenyan in 10 years perhaps more than what Kenya Post & Telecommunications may have done for half a century.

Three years ago, I questioned the wisdom of listing Safaricom shares on Nairobi Stock Exchange at a time when even its CEO claimed not to know some of its owners, especially those that owned Mobitelea.

At that time I argued that it was risky to hoodwink Kenyans into having shares in a company that had problems giving full disclosure to the public.

This argument infuriated the Safaricom top management so much that they wrote a letter to the editor of the newspaper wondering why they published my article in the first place.

Three years later, the Safaricom performance at the stock exchange has vindicated me. At best it is now selling at Ksh4. 60 when the initial offer was at Ksh5.00.

In the first one year, its stocks fell to as low as Ksh2.00, causing millions of Kenyans that borrowed cash to buy the “lucrative” shares sleepless nights. Many of them were left in tears as banks hounded their businesses and employers.

Millions lost their meager savings to the Safaricom fiasco. Assuming that I bought a million Safaricom shares and spent my Ksh5m on the same, I would today lose Ksh500,000 on my investment at the present NSE Safaricom share price after waiting for three years.

Yet, if I had borrowed that money from my bankers, I would have paid to date Ksh2.1m in interest alone.

Now, as the mobile telephone price war has taken centre stage, chances are that Safaricom share value will drop further like it has been dipping all week.

Chances are that there will be a lot more share dumping at the stock exchange with even more dire consequences for the small investors who took loans from banks a few years ago.

If Safaricom earnings come down, it will be due the insensitivity and greed of its management. It will be because its owners worshipped profits at the altar of capitalism unmindful of the people that sustained those profits.

Now the chickens have come home to roost. Yes, this price war must spread throughout East Africa to enable East Africans communicate at affordable rates.

jerry@jerryokungu.com