The Celtel – Safaricom rivalry is well known and accepted in Kenya. Indications are however that we are yet to see anything of this rivalry as it begins to really heat up. Clearly Celtel has started an aggressive effort to gain market share over Safaricom, which has maintained a strong lead in the past.
The first level of this aggressive crusade started when Celtel announced its One Network – that is, its customers ability to call and receive anywhere in East Africa as if they are at home. Soon afterwards, they announced two tariffs that analysts agree are geared to start a price war between the two mammoths.
Naushad Merali, the founder of Sameer Group, a minor shareholder of Celtel Kenya – he reportedly made $20 Million out of the sale of Kencell from Vivendi to Celtel – in one hour!
Safaricom has in the past enjoyed the position of a quasi –monopoly because of the fact that it started first and could afford to maintain the lowest price. They were first in the Kenyan market to start cost related initiatives such as per second billing, off peak tariffs among others and the incumbent at the time, Kencell was too small to compete at that level. What Kencell did do, is focus on widening its network and maintaining a clearer more stable network. It also focused on placing better coverage in the rural areas.
When Vivendi, the international owner of Kencell decided to sell its shareholding, Business magnate Naushad Merali brokered a cunning deal bringing on Celtel into the market and reportedly making a whopping $20 Million – in one hour.
The point where things changed: Michael Joseph (right) of Safaricom and Gerhard May of Celtel with the International Gateway Licences for both Networks
Celtel’s strategy did not differ from that of Kencell’s much in that they focused first on getting coverage deep into the rural areas, maintaining a sturdy network and acquiring an international gateway licence, which they did on the same day as Safaricom on June 30 2006.
Clearly, this was to be the beginning of the end for Safaricom’s dominatrix status. Soon, Safaricom had rolled out its international calling service 888 as well as reduced calling tariffs in that regard. Celtel introduced the same services and in the minds of their respective customers it was nice to have but still no big deal – that is until Celtel announced the Celtel One Network and most recently, the Umoja and Uhuru Tariffs.
Gerhard May, right, CEO of Celtel Kenya gearing up to kick some competition’s ass.
This year alone, Safaricom has launched five new services for its consumers. For Celtel, the count is seven – the latest being the new tariffs, which bring the costs down to as low as Kshs12 – $0.16 per minute.
All of a sudden the atmosphere of the competition began to change perceptibly with Michael Joseph sounding less bullish in recent times. Celtel clearly is on the attack in this intricate chess game and the tables seem to be turning. For the first time since the “peculiar calling habits” comment, Joseph was on the defensive.
According to myadsl.co.za, Celtel has won enough new customers to recoup the technology development costs and far outweigh the revenue lost by eliminating roaming fees, since it launched the One Network service in September. Subscriber growth is 20% higher than normal in the three countries as it attracts more first-time users and lures others from rival operators.
Safaricom’s CEO, Michael Joseph: just a bit pensive?
On this, Michael Joseph was quoted as saying, “We can do and we will do exactly the same as they are doing.
“If we have an agreement with MTN Uganda and Vodacom of Tanzania, we can exactly the same thing as what Celtel has done.”
Clearly Celtel has an advantage over the besieged operators because of its ease of decision making in cross border matters. Safaricom cannot hope to compete quite as fast across the borders – which for many, is where the action is.
Tito Alai, Celtel’s Chief Commercial Officer, in a recent interview with Al Kags, said that the difference between Africans across borders is non-existant. The real difference he opined is the same as it is within any country – economic buying power. It is this philosophy that seems to be driving Celtel’s move towards uniying tariffs in the 14 countries it operates in and eventually across Africa.
They can however jump into the puddle where the cost issue is concerned which analysts feel is what the Safaricom Christmas offer entails. But the first day of the offer was a bonus for Celtel’s marketing team and the tactical approach that they took in Nairobi is a further indication of the cut throat competitive stance that they have adopted. (See Celtel Kicks Safaricom’s Ass on 22-12)
“I think that Safaricom is trying to test its capacity if they were to reduce costs and if today is anything to go by, one must feel sorry for them.” Gitau Mwarethi is a Telecommunications Engineer and a mobile phone shop owner in downtown Nairobi.
“This is the one time, that elephants will fight and the grass will benefit,” he quips, making reference to an old Swahili saying that says when two elephants fight, the grass will suffer.