For youngest mobile phone firm, the war has just begun

Source: http://www.eastandard.net/InsidePage.php?id=1144013286&catid=457&a=1

ix months after its entry into the local market, Yu, Kenya’s youngest mobile phone services company, feels it has grown enough muscles to take on its older rivals in the business.

In a span of about two months, the holding company has changed its name from Econet Wireless Kenya to Essar Communications and the seams seem to be busting with a number of sweetheart offers, tailored to woo new customers.

About a fortnight ago, the company launched free Short Message Service (SMS) for intra network messages. The free SMS model is a first in Kenya and could significantly drive up the uptake of its services.

"At Sh7.50 for cross network calls and fifty cents for intra-network charges, we are offering the cheapest calling rates in the country. Our idea is to offer services at the cheapest rates and grow our market share," says Yu's MD Srinivasa Iyengar.

It could be a tall order for the company given the general slowdown of the economy. Companies seeking to expand have been experiencing setbacks in sales projections as job cuts, and inflation, eat into consumer purses, slowing down new spending.

Entering the country’s mobile telephone market is a capital-intensive venture, given the nature of the market, customer loyalties and a myriad other factors. It also involves fighting vicious publicity wars against established market players, which also entails massive expenditures.

But, Iyengar, is confident that Yu will pull it off because the company’s current business model has been working well in India, where mobile companies charge minimal rates for services then rely on the mass market to drive up their profits.

The Indian way

Last year, Econet Wireless International sold a 49 per cent stake in the company to India’s Essar Communications Holdings in a move that was expected to significantly benefit the company, which is 70 per cent owned by EWI, in its a rollout and enhance its products.

So far, the company seems to be going the Indian way and the latest offer of free SMS could be geared to shepherd the mobile market in the direction of what is popularly referred to as bundle SMS offers in the Indian market.

Under the bundle regime, mobile users are given opportunity to determine and buy the number of SMS they would like to send in a bundle, say 40, 70 or more in a month and then pay heavily discounted prices for the services, depending on the chosen bundles.

Although he is not shy to admit that his company could be operating at a loss because of its chosen model of business, Iyengar is confident that it will pay off in the long run.

"The mobile market is growing and we hope to shore up our subscriber base to three million in the next two years. We are offering the best services. This is not something to advertise because the information is out there. It is time for people to begin asking the hard questions, especially about mobile charges and subscribe to the best offers," says Iyengar.

In the latest sector statistics report, the market regulator, Communication Commissions of Kenya (CCK) says that with the addition of new players like Yu, competition is expected to intensify leading to a range of benefits such as reduction in cost and choice for consumers, which will ultimately increase mobile penetration in the country.

So far Safaricom is the market leader with a market share estimated at about 80 per cent, followed by Zain. The latest entrants into the mobile market, Orange and Yu have also been gaining slices and are expected to grow with the market.

new subscribers

But Iyengar says some mobile companies are charging too high for services and feels this is immoral, especially in a country where people are still struggling to buy bread.

"It makes such companies look bad. In fact you can see the anxiety in people’s faces whenever they are making calls. They have to hurry and talk fast to save on costs, which I think is also destroying interpersonal relationships. We have to find a way of lowering call costs to remedy the situation," says Iyengar.

Recent entrants to the mobile market like Yu have been for the adoption of mobile number portability, which has traditionally benefited new entrants into markets.

But established market players have not been receptive of the idea that allows subscribers to migrate to new operators with their old numbers.

To circumvent the bottlenecks, Yu launched a similar service, which allows its customers to retain their old numbers while operating under the company’s prefixes.

Another new service in its stable, imoved allows new subscribers on the network to inform their contacts about their new mobile numbers free of charge.