Kenya - Zain is working hard to add low-income customers against tough competition

[all africa] Zain Kenya is going flat out after the low-income mobile subscribers in what is perhaps its biggest strategic shift since its establishment as Kencell in 2000.

The shift now directly pits it against its three competitors -- market leader Safaricom, Telkom Kenya's Orange and Essar Kenya's yu -- in what is already a fierce fight for the low-end market.

Kenya's second mobile services operator with a 15 per cent market share has had a bias for the high-end individual and corporate segments, which analysts say may have hit a growth plateau.

"Zain has been targeting the high-value customers, but we are shifting our strategic focus to the mass market," managing director Rene Meza announced yesterday while unveiling a new tariff that matches yu's Sh6 per minute for cross network calls and Sh3 within networks.

The new rates will apply for calls made between 6pm and 6am, while its subscribers will still pay Sh8 to call within Zain and Sh12 to competing networks.

The new rates, which do not require any subscription, will apply automatically for all customers on pre-paid and post-paid tariff plans, the company said.

Mr Meza attributed the ability to reduce the rates to "optimisation" of Zain's cost structure, which has made the mobile operator cut its costs by 25 per cent.

Zain Kenya outsourced its customer care operations and network management to Nokia Siemens last year.

The shift in strategy comes barely a month after its parent company, Kuwait Telecoms, sold all but two of its African operations to Bharti Airtel of India, in a $10.7 billion deal due to be completed this month.

Airtel operates a mass-market model in India, which maintains neat margins despite lower tariffs.

The Indian operator has also managed to stay lean and mean and its employee headcount has remained constant despite its scorching-pace of growth.

This can be attributed to its outsourcing model.

For Bharti, Africa is seen as its natural fit, which has thrived in an Indian market with low incomes and tariffs and a heavily rural population -- characteristics shared by African countries.

Meanwhile, Mr Meza said that the firm was investing Sh350 million up to December this year to expand its money transfer platform, Zap, to areas that have not been covered.

According to him, the money transfer that boasts half-a-million subscribers and 1,700 agents currently transacts about Sh250 million per month, a distant second to Safaricom M-Pesa with about 15 million subscribers.

The firm also announced its intention to start rolling out third-generation networks (3G) in July as it anticipates the market regulator to reduce licence fees currently at $25 million.

Zain, Telkom Kenya and Essar Telkom have disputed the fee saying it is exorbitantly high, but Safaricom, the only player that had paid the amount for the licence, maintains they must be treated equally.

"Our data business has grown by over 35 per cent year on year at the end of the first quarter of 2010. This is going to be the driver for growth going forward," Mr Meza said.

Kenya: Zain Stirs Low-End Market