If you have been following up the news on mobile phone company price wars and you are a share holder of safaricom you should be ready for a fall in the share prices in the near future. Please consider the following facts:
1. In the year ended March 2010 safaricom had a revenue of approx ksh 80 billion given that over 80 % was from voice it translates that the revenue from mobile voice service was approximately ksh 64 billion. during that period the average calling rates was ksh 8 per minute so we can say a total talk tome for that year was 8 billion minutes.
2. At the current price 8 billion minutes would result into a maximum revenue of ksh 24 billion(assuming calling rates of ksh 3)
3. Assuming the revenue of other services such as MPESA and data will be around a maximim of 20 billion this year then the total revenue will be approximately ksh 44 billion.
4. From the last finanncial result the PBT was approximately ksh 20 billion meaning their total costs was approximately 60 billion.
5. If Safaricom does not review its bisuness strategy then there are very high chances that it will record a loss when it releases the next financial results.

5. Given that there will be a change of guard at safaricom then the employers must be ready for a round of retrenchments,
Dealers must be ready for a cut in the the rates of commissions.

What will happen to the stock market prices???? I leave you to answer that????

I welcome your criticism on this article

Please

2. At the current price 8 billion minutes would result into a maximum revenue of ksh 24 billion(assuming calling rates of ksh 3)


The assumption of 8 billion minutes may be correct but you may also need to consider that with reduced calling rates, there comes a behavioural change...More people will talk more, so the loss in revenue incurred from reduced calling charges will in part be cushioned by the increase in the amount of talk time.

i take back my comments....No increase in talk time

http://www.businessdaily.../-/k703cdz/-/index.html

A wise man changes his mind.

Olu, there will surely be an increase in talk time. It may not show now, but it will definately happen. Whatw e need to figure out is:

1. will talk time increase three fold as price per minute is down that much?

2. Will talk time on Safcom increase more than on other networks?

Data, Mpesa etc is all very sexy, but frankly most telcos worldwide make their money from voice. Dont be fooled otherwise.

Clearly, Safaricom are in trouble, BIG trouble. I wish they could lower their data charges before the battle gets to there.

Being in cost management myself. Slaying that dragon of costs is as difficult as you can imagine. It is even more difficult if the costs are of a fixed nature esp. contractual (Staff, Rents etc)

Safaricom's cost structure I am sure includes at least 70% of its costs as being fixed. Here there is no short cut - A retrenchment and rationalisation is a must and I am seeing it happen within the next 3 months.

@Kulahepi,
What??.....Are you sure?.

Chairman,
Huuu!!!....Maybe that's what Zain meant by "four more trump cards".Looks like time to start making a huge coffin for Safcom....wooooiiee!!

I think in the data war, Safcon will survive, but I see the likes of Access etc etc taking the brunt of the hit. Why pay them 5k a month for a line that is fixed, when you can have this?

Its just like voice, the target was Safcon yet the victim was Orange.