Bharti Airtel has announced its first aggressive pricing to the consumers in Kenya market, a first of its kind move by Bharti since its acquisition of Zain Group’s mobile operations in 15 countries across Africa. The deep cut in tariffs can have significant impact on customer acquisition and market share cannibalization in the highly competitive Kenyan market.
Kenya’s 20 million mobile phone market is the second largest operation of Zain acquired by Bharti Airtel. The low margin volume game that Airtel pioneered in India will help mobile telephony to reach the unexplored segments which still has significant potential as the mobile penetration in the market is still less than 50 percent.

KENYA MOBILE MARKET OVERVIEW:
-Four mobile players in the market i.e. Safaricom, Zain, Orange (Telekom Kenya), Yu (Essar).
-Safaricom has built a very strong proposition in the market with >70% market share and has managed to grow the market share gap with the competitors in past few years
-The slash in new tariff structure will help Bharti Airtel put significant pressure on the market leader Safaricom to protect their market share. The new Tariff structure will help Zain-Airtel penetrate lower income tiers.
-Safaricom will have to come up with a robust strategy to protect their market share as well as growth. It’s mobile money service M-PESA has been a tremendous success in the market with huge unbanked population with over 2 million users.
-Airtel-Zain holds <20% market share and has witnessed continuous loss of market share to Safaricom in recent times.
-Orange is the Third operator in the market, entered in 2008 when France Telecom brought Telkom, the incumbent. Orange can bring some aggressive pricing structure as well as innovative products to the market.
-YU (Essar) is the fourth mobile operator in the Kenya, launched in 2008 despite receiving license in 2004. Mainly targets 18-35 years audience with affordable pricing. YU will be under tremendous pressure with the new tariffs launched by Airtel as they have stated to be ‘the cheapest forever’.

Average minutes of usage (MOU) per subscriber for Airtel-Zain’s African Operations are still as less as one-third of Indian MOUs, and there is, therefore, the potential for exploring usage elasticity and replicating the minute factory model.
The Tariff slash move by Bharti- Airtel might be seen as a start to implement its successful ‘MINUTE FACTORY MODEL’ in the acquired African operations. The low price high volume model is ‘Minute led’ model compared to ‘Subscriber led’ models that were traditionally used in mobile industry.
‘Minute Factory Model’ is based on product/factory perspective considering ‘Minutes’ as a final product produced through a complex chain of outsourced units i.e. customer support, IT, Infrastructure, Network. Zain-Airtel focuses on selling maximum ‘Minutes’ produced i.e. Maximizing per minute profitability and adding additional capabilities as the demand raises. The beauty of the Airtel’s Minutes Factory is that it can add small capacities fairly rapidly and economically. The key to this is an array of partnerships & relationship that manufacture” the minutes for Airtel removing the burden of fixed cost.

As the Tariffs in Africa are relatively still high, one can expect several similar moves by the telecom giant in the other market to stimulate demand by cutting cost.