The telecom industry could soon witness a new wave of price wars following the launch of a new telecom company that will enable subscribers to make a call at only Shs74.
Smart Telecom, which has been running the “Give Us a Name” campaigns launched yesterday in the market, after buying off Sure Telecom license, which had failed to attract subscribers since its launch in December 2012.
Smart Telecom, which is part of the Aga Khan Fund for Economic Development (AKFED), will use “074” as its code.
At Shs74 per call, Smart telecom becomes the cheapest telecom company in the market.
The existing telecoms charge an average of Shs270 per minute.
Justifying the low call rate, Mr Abdellatif Bouziani, Group chief executive officer, Smart Telecom East Africa said: “Like we asked East Africans to give us a name, we also asked them what they wanted from us and they said they wanted to make calls without being under pressure of time that’s why we are offering subscribers an opportunity to make a call without minding at a clock ticking and pay only Shs74.”
He added: “Everything was well calculated, when you get people who are making a successful calls, the business will be successful. So our business model is based on numbers and how many subscribers we can attract.”
It should be remembered that Warid Telecom entered the Uganda market in 2008 with a similar low pricing model, which later turned out to be sustainable and hurt their bottom line in the long run.
As a result, the telecom was acquired by Airtel last year.
Warid ignited the 2010 price war in the telecommunications industry as competition for customer numbers and market share heat up, resulting into a sharp drop in call rates for both within and off-network from a market average of Shs380 per minute to Shs180 per minute, and later to Shs1 per second for on-network calls.
Players such as MTN criticized price wars saying they saying they are distortionary, unsustainable and unhealthy to the industry and the economy as they result in low tax revenues.
It should also be remembered that during the price wars, the quality of telecom service deteriorated amid growth in subscriber numbers.
Uganda’s telecom sector currently has seven players including MTN, Airtel, Uganda Telecom, Orange, Smile, K2 and Smart – the latest entrant.
Uganda’s telecom sector penetration is estimated at about 60 per cent with mobile phone subscriptions in the estimated at about 17 million.