Kenyans shun SMS use due to reduced voice tariffs

The number of text messages or SMS sent by Kenya’s over 25 million mobile phone subscribers continues to decline significantly as the country’s four mobile network providers – Safaricom, Airtel Kenya, Telkom Orange and yuMobile – reduce both their on and off-net calling tariffs.

According to the Communications Commission of Kenya (CCK) 2011 Annual Report, the number of SMSes sent by subscribers reduced from a high of 2.73 billion in 2008/09 to a low of 2.62 billion in 2010/11 season, a situation which indicates that with the reduced voice reduced tariffs, subscribers would rather call and get immediate feedback from the other party than wait for an SMS to be received and sent back and forth between the two parties.

“The dominance of pre-paid subscriptions may be attributed to the trend that the bulk of the mobile operators’ advertising, special offers and promotions are geared towards increasing the number of pre-paid subscribers. The high number of prepaid subscribers could also be attributable to prevalence of low denomination prepay calling cards, which are as low as Kshs 5 and, therefore, affordable to a majority of Kenyans,” states the report released this week.

The report notes that the reduction in SMS volumes “may be attributed to reduction in voice tariff calling rates that resulted from a reduction in interconnection rates during the year under review,” adding that at the end of the period under review, mobile networks recorded increased international incoming traffic to the tune of 605,209,985 minutes up from 570,367,665 minutes recorded the previous year.

On the other hand, international outgoing traffic increased to 505,840,566 minutes from 220,133,307 minutes during the same period. These represent increases in international incoming and outgoing traffic of 6 percent and 130 per cent, respectively.

The increase in international outgoing traffic could be attributed to a reduction in international calling rates by the four mobile operators to an average of Kshs 3 per minute in certain tariff bands (US, India, China, and Canada).

“The operators reduced both on-net and off-net tariffs in a bid to attract and retain customers on their respective networks following the Commission’s intervention in lowering mobile termination rates. Subsequently, mobile penetration increased from 51.2 per cent in June 2010 to 63.6 percent as at June 30 2011. This penetration was above the African penetration rates estimated by ITU at 41 percent during the same period,” states the CCK report.

The decline in SMS use and volumes is also having a resultant impact on the mobile networks’ overall revenue, with market leader Safaricom reporting to investors during the CEEMEA Conference London that its SMS revenues contributed 6.9 per cent of overall revenues in 2009, dropping to 6.5 per cent in 2010 before increasing to 8.5 per cent in 2011.

The CCK Annual report further states that the “proportion of pre-paid subscribers continued to overshadow post-paid subscriptions, accounting for 99 per cent of the total mobile subscribers translating to 25.0 million subscribers out of the 25.2 million recorded during the period under review.”