Airtel’s rates are not sustainable- Safaricom CEO

BHARTI Airtel's Group Chairman, Sunil Mittal
SAFARICOM Chief Executive Officer Bob Collymore has termed the ongoing price war in the mobile phone industry in Kenya as ‘morally reprehensible’.

The CEO said that if left unchecked, the mobile industry in Kenya may collapse.

A bitter Collymore accused Bharti Airtel of sending a bad signal to the industry:

“The Ksh 1 ($0.0125) set by Bharti is not sustainable. If we all move in the same direction, there will be a hell of problems,” he said.

“I’m in charge of looking at the interest of my employees and shareholders which I am charged with,” he added.

In a related development, the Permanent Secretary for Information Bitange Ndemo has described the ongoing war as an “unnecessary headache”.

Ndemo said the government was looking into the pricing issue very keenly.

“We have asked CCK (Communications Commission of Kenya) to evaluate if this kind of pricing is sustainable,” added Dr Ndemo

Citing the Kenya Revenue Authority’s recent failure to meet its 2010/11 first half collection target by Sh5 billion, the Permanent Secretary said the Airtel-triggered price war could not have come at a worse time.

The KRA raised Sh303 billion against a target of Sh308 billion in the first half of the current fiscal year, missing its target while the country is in the middle of implementing the new Constitution and tackling a drought ravaging the country.

Dr Ndemo said the government and millions of Kenyans, are heavily invested in the communications sector and any instability could have a ripple effect on the economy.

“ I am not opposed to reduced prices but they have to make business sense,” he said. “Competition has to take care of re-investment in the sector as well as shareholder value.”

This is the second time in five months that Airtel Kenya has reduced its rates.

Orange Kenya CEO Mickael Ghossein said that the future of the industry’s profitability appears grim should the current price wars be allowed to prevail.

“There has not been largely significant increase in the traffic across networks that would indicate that the low pricing model offered by the competition has resulted in massive recruitments.

In any case, cannibalization of another player’s market share cannot be considered as industry growth,” Ghossein said.-

BRIAN ADERO in Nairobi, Kenya