YU: PS Ndemo Might Not be Justified to Comment on Price Wars

Essar Kenya (YU) CEO was being hosted by Larry Madowo on KTN’s Financial Report programme. I liked what I was getting from the guy (YU CEO). He seems to have a good grasp of the market and the dynamic and is pretty honest considering that they are still just controlling 8.2% of the market and so no dictattorial tendencies and arrogance displayed by the other networks.

But his points were clear especially in regards to Dr Ndemo’s comments yesterday to Reuters which upto now looks like a PR war the Ministry if fighting for Safaricom. When Dr Ndemo talks of prices falling proportionally in the interview, what does he mean? It means that CCK also should have lowered the rates proportionally. Why lower rates by 50% and expect operators to lower rates in tranches of 10% or 20% or even 5%s? What is that now?

The Host, Larry Madowo, asked a question which reinforces my point always that our scribes are not well informed about what is happening in the market. He asked Yu why they had to lower the rates so low and if at all they were making money without realising the fact that voice is a very basic part of communication and any serious player should only make money out of the volume sold and not neccessarily the rates. Real money should be made from VAS, Value Added Services, and none of the players is currently exploiting this sector of the market.

YU CEO also talked of the company talking to CCK in regards to 3G license. He argued that the 3G technology is not so important or might not make economic sense for investors because a small number of the handsets which can handle the technology are affordable. he argued that the handsets are not affordable and I agree but I say that technology should move ahead of the consumer for it to be relevant. If you let the consumer move ahead of you, they will go with the players who were first and wont care much because data services is yet to become the primary reason why we buy phones. The main reason why most of us own mobile phones is because we want voice communication.

I liked his other points especially on YU-Cash and I would love to engage him on these.