Price Leadership - Safaricom versus Zain

By Jessica Colaço
  Published 23 Aug 2010
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Have the market leaders - Safaricom become price followers instead of price leaders ? Are Zain the price leaders with growing market share? How the tables have turned!!! A market leader is a firm that has the largest percentage of the market in term of total sales revenue. They often dominate competitors in customer loyalty, distribution coverage, image, perceived value, price, profit, and promotional spending. Last Wednesday, the Communications Commission of Kenya (CCK) slashed interconnection rates from Sh4.21 to Sh2.21, making it cheaper to call across networks. Zain Kenya, recently bought by India's largest mobile operator, Bharti Airtel, followed the move by slashing its calling rates from Sh6 to a flat rate of Sh3 per minute and Sh1 for SMS. Becoming the price leaders in this case.
Business Daily talked to Zain Kenya managing director Rene Meza on the strategies Zain intends to use this time round to sustain such a price war and the impact on the company’s business.
You have opened a pricing war in the voice market. Do you have the muscle to sustain it? -source - "This is a new business model that has been made possible by our new owners, Bharti Airtel, who also have a right mindset on what we can do and when. We are going to leverage on their economies of scale being the fifth biggest mobile provider globally, which should help us cut on our capital expenditure. " Where are the others - Orange and Yu? What are your views? Will Safaricom continue to be the price followers or will they retaliate to become the price leaders again? Only time will tell...
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