Yu free calls cause ripples in market

By Morris Aron and Patrick GithinjiCaught in fierce competition for subscribers, Essar Telecom Kenya has resorted to the only lifeline it has to grow its market share.
Last week, the company announced that its subscribers will now call for free when making yu-to-yu links from six in the morning to six in the evening, effectively making it the most enticing on-net tariff network.
Unlike other offers concentrated on off-peak hours, mostly at night, yu has pulled a first and is waiting to see if the strategy works. Market analysts will be watching closely to see if the move would lead to growth in subscriber numbers, with information that the company is repackaging to attractive lucrative offers as it plans to exit the market.
"Yu is trying to fatten the chicken to attract the buyer," said one player who asked not be quoted.
But while that is the view of a number of observers, the new country manager insists that the move is one of the strategies the firm is employing in growing market share and enhancing brand loyalty.
"The offer is absolutely free. There are no hidden charges or subscription charges per day. We take this seriously and our competitors should know that we are in the market to stay," Taneja said. Faced with slowest subscriber growth rate compared to the other mobile phone companies, and facing the effects of a presidential directive that interconnection rates – the money one operator pays the other when a subscriber makes a call to another network – will no longer go lower than Sh2.21, Essar Telecom Kenya is pulling all manner of stops to remain afloat.
The latest CCK sector report shows that the company has a market share of 6.4 per cent and roped in 125,868 subscribers between October and December to 1.6 million.
With the firm’s latest move, the debate has now shifted to whether free on-net calls will salvage the company’s image and turn around its fortunes amid talk that it is looking at exiting the market.
Mobile trends analysts have already opined that it will take more than just free on-net calls for the fortunes of the company to revert and Essar Telecom Kenya to recover lost ground. They argue that the company also needs to pay attention to its other services, particularly mobile money facility, yuCash, and other value added services if it hopes to grow its market share.
And should other players adopt the same kind of strategy, yu’s free on-net calls will have amounted to nought. Taneja defended the move saying that it is research driven. "We conducted a research and we found that most people call during the day."
Brand’s values The all day free calls offer is in line with the brand’s centric values that are geared towards responding to consumer needs.
"By giving free calls all day, we are demonstrating our commitment to make mobile telephony more affordable and accessible. We are confident that our subscribers will embrace our repositioning as we continue to work toward developing more innovative communication solutions that respond to their needs," he said.
Madhur revealed that these offer would be executed in phases. The second phase will be announced in four weeks time.
An industry expert argues that the firm is likely to plunge into more debt given that they don’t have the right mitigation tools.
"What is yu known for?" Sam Kiptoo, a telecom consultant posed.
"They are neither in data or money transfer. Short messaging service also cannot sustain their revenue," Kiptoo added.
The promotion, Kiptoo argues, is a strategy to test the firm infrastructure capacity in terms of subscribers’ numbers.
"No serious competitor can offer free calls all day. The network will get jammed. You realise that they have never built numbers and most of their infrastructure has remained idle," he said.
Yu country manager says they were betting big on mobile number portability to win more subscribers, but this has not worked.
But even as yu dusts off itself, another problem is in the offing – cash flow.
Last month yu sued a data network provider (Kenya Data Network) for threatening to switch off its connectivity over Sh80 million debt dispute. Yu succeeded in getting a court injunction against KDN barring it from switching off transmission connectivity.