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Safaricom of Kenya Will Protect Its Margins in Price War, CEO Joseph Says
Safaricom Ltd., Kenya’s biggest mobile-phone company, isn’t prepared to lose market leadership in Kenya and will protect its margins, Chief Executive Officer Michael Joseph said.
“Margins are sacred to us,” he told reporters in Kenya’s capital, Nairobi, today.
Its response to a reduction in call charges by its competitors will be “measured” and current average call rates of 3 shillings per minute are “not sustainable,” he said.
Bharti Airtel Ltd.’s Zain Kenya unit, Essar Telecom Kenya Ltd. and Telkom Kenya Ltd. lowered prices after the Communications Commission of Kenya reduced the rate mobile companies can charge each other for connecting calls across networks on Aug. 19.
Safaricom shares have dropped 16 percent since Aug. 19 and closed unchanged at 4.8 shillings by 3 p.m. in Nairobi.
“All of us are concerned about the value of the share price today,” Joseph said. “We believe the market has overreacted to this price war.”
The mobile-network operator, which holds 78.3 percent of the Kenyan mobile-phone market, expects a correction in the share price, which may reach 5.8 shillings “in coming weeks,” Joseph said.
The biggest company by market value in Kenya, Safaricom may report a “dip” in revenue while its profit will be little changed in the fiscal year to March 2011, Joseph said.
At the beginning of the current fiscal year, the company embarked on a project to save as much as 1 billion shillings (12.41 million) in operating costs, Joseph said.
“We don’t see any risk on the dividend” due to the price war, he said.
To contact the reporter on this story: Eric Ombok in Nairobi at eombok@bloomberg.net.
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