Safaricom avoids price wars with Starlink in internet market battle

The telecoms operator also introduced a higher speed package of 1,000 megabytes mbps from the previous maximum of 100mbps in response to Starlink, which has shaken the market since it entered Kenya in July last year.

This is a direct reply at Starlink, which has been targeting high speed customers with a minimum price of Sh1,300 for a limited 50 gigabyte package of a 120mbps speed.

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The new Safaricom’s high speed package, which will cost Sh20,000 per month for 1,000 mbps, targets high-speed users like gamers, content creators, and virtual reality app developers and users.

Starlink offers unlimited internet with countrywide coverage, in-motion and international travel use for Sh14, 000 a month, reflecting the determination of Musk's outfit to use prices as a key market share driver in Kenya.

Safaricom has avoided cutting prices to protect a business unit that has recorded double-digit growth over the past three years, generating Sh15.1 billion to the telco in the year to March 2024.

Analysts view Safaricom’s resistance to a tariff cut as a strategic move to keep the business sustainable.

“Going the price war way would be soft on costs but really hard on the topline, meaning Safaricom would have to take a hit on its revenues,” says Wesley Manambo, research associate at the Standard Investment Bank.

“If you have the option of raising the bandwidth speed as opposed to lowering the prices to deal with the rising competition, then from a revenue perspective it makes better sense to raise the bandwidth offering.”

The number of Kenyans using satellite internet has surged since Starlink, a subsidiary of Musk’s aerospace company SpaceX, entered the Kenyan market in July last year.

The American firm riding on the back of the world's richest persons with a net worth of $237 billion (Sh30.6 trillion) is betting on lowering internet costs including discounts hardware acquisition and lease plans in a segment dominated by Safaricom, Jamii Telecommunications Limited (JTL) and Zuku.

Read: Safaricom firms up Internet market share with 43pc home fibre link rise

Latest data from the Communications Authority of Kenya (CA) reveals that following Starlink’s entry into the Kenyan market, satellite internet usage has more than tripled to 4,808 subscriptions in March, up from just 1,354 in September last year.

The American tech-giant has emerged as a potential threat to Safaricom, which last month requested CA to withdraw the licence granted to Starlink, claiming it could facilitate illegal connections.

Safaricom’s introduction of the new plan, which offers 1,000mbps speed, seems to be a go at the market share of the satellite ISPs in the country, as it is them that have mostly been serving such customers.

Based on the latest CA data, customers buying between 100mbps and 1,000mbps comprise about 94 percent of satellite internet subscribers, while majority of fixed fibre and cable internet customers use between two and 10mbps.

Safaricom will also “carry out estate clinics, enhance capacity in congested areas, and avail competitive 4G and 5G propositions for homes in areas outside fibre coverage,” the telco said Monday, pointing to a revamped focus on customer satisfaction as Musk’s penetration of the market deepens.

It has also introduced a ‘Family Share Plan’ which integrates voice, mobile data, and SMS with the home fibre internet, and can be shared with up to five people, at an additional charge.

Safaricom currently controls the giant share of the fixed internet market, with about 37.4 percent of all subscribers, followed by Jamii Telecoms (Faiba) and Wananchi Group (Zuku), which enjoy about 23 percent and 19 percent of the market share respectively.

For Safaricom, fixed internet is one its fastest growing business segments, and the only one that has maintained a double-digit growth for the last three years.

It accounted for about 4.5 percent of the firm’s revenue in the last financial year, up from about 1.4 percent in the year to March 2021, highlighting the segment’s growing significance in Safaricom’s financials.