Mobile firms export price wars to clients calling outside the

country

Part 1 – Summary

Despite Safaricom’s monopoly in the mobile telecommunication industry for the past few
years, Zain Kenya and Safaricom have been battling out on customers for the past few
months.

After engaging in price wars for the local rates, Zain Kenya has initiated a new move by
slashing down the rates of international calls. Zain subscribers now have to pay a mere
Ksh. 3 per minute when making an international call to India, Canada, U.S.A or china,
with revised rates for other countries as well.

Another emerging company, Yu, has followed this move by further slashing their rates to
a minimal Ksh.2.49 for the same international calls. This has led to some ‘trouble’ for
Safaricom as it now risks losing customers to the two Indian based firms.

However making calls to our neighbors in the East African region is still quite expensive
as compared to calls made to the Asian and Middle East regions.

Mr. Rene Meza, the Chief Executive Officer of Zain Kenya, said that the key factor that
caused the hike in prices in the neighborhood, East African region was the
interconnection rates charged by the respective countries.

Top managers in the industry are now looking for every means possible to cut down the
rates for calls within the African continent as well. Mr. Atul Chaturvedi, CEO of YU,
was quoted saying, “In the world of melting international boundaries, why should
communication across borders be so expensive?,’’

Part 2 – Critique

The price wars and regulations will continue to be the main threat to Safaricom’s profit
levels; However, Safaricom will fight to claw back any losses as it’s known to do.

Safaricom posted Sh20.9 billion for the year ended March 2010 and controls 78.3 per
cent of the 20 million-strong mobile market. Safaricom charges Sh12 per minute on those
calling to other networks, while Orange charges Sh8 and yu Sh6, while Zain charged Sh8
before the recent revision to Sh.3.

The above article relates to Strategic Management since the price wars between firms in
the same industry will force the mangers to come up with new strategies in order for their
respective firms to get the cutting edge over its competitors. Hence I thought it fitted
well into the strategic management and planning outline since the managers will have to
plan and come up with sound management decisions.
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