Richard Gitonga

3 September 2010

Over the past couple of days there has been a lot of coverage of the price wars that local telcos are engaged in following the reduction of interconnection rates set up by the industry regulator.

Interconnection agreements are established between telcos to allow their subscribers to dial across networks.

Such agreements include clauses on how revenues will be shared between telcos.

It is characteristic for competitive industries to use pricing as a tactic to win over customers.

Unfortunately, this tactic has short term benefits and rarely gains customer loyalty in the long term.

In the telecommunication industry, prices of voice calls have been declining over the years.

As a result, the key performance indicator for telcos, average revenue per user or ARPU has been declining.

This state of affairs has forced telcos to rethink their strategy on how to grow revenues and maintain profitability.

Retain customers

The reality of the matter is that telcos can no longer depend on voice calls as their primary source of revenue because the voice category is fast becoming commoditised.

In the very near future, voice calls will be provided for free alongside other value added services.

Experience from more advanced countries shows that our local telcos will have to rethink how they acquire and retain customers.

They will probably have to consider insisting that all customers enter formal contracts with them in order to enjoy their services.

These contracts will probably oblige customers to pay a fixed annual fee regardless of whether customers are active or inactive.

With the mandatory registration of customer SIM cards, this makes this proposition all the more compelling for telcos to consider.

With the commoditisation of voice calls, telcos that want to stay ahead of the competition have to seriously consider innovating and introducing new value added services to create new revenue streams.

Some telcos have figured this out and are aggressively building value added services such as mobile money transfer services and providing internet access and online content.

But other telcos appear stuck in the past and are struggling to provide basic services in both voice and data categories.

In this new age of broadband technologies, telcos need to think out of the box and consider launching new services that are not only innovative, but that provide real value to customers.

We are now in the new age of broadband multimedia where there is a whole new range of opportunities for telecommunications companies.

For example, telcos can leverage their nationwide broadband networks to launch security surveillance services where customers can access remote security cameras installed in their homes and offices.

Project managers and engineers in utility industries such as oil and electricity who are mandated with maintenance and servicing of numerous remote installations can be able to monitor their equipment from their mobile phones through the use of secure IP addresses.

Online maps

We are also in the age of online maps and all mobile phone users should be able to use their phones to navigate through the various cities and towns in the country.

For an annual subscription and a reasonable fee, we should be able to use our phones to download maps of different parts of Nairobi city to help us navigate with ease.

In the same breath, these maps should not necessarily be passive but should be active in such a way that subscribers are able to get information on roads that are congested and where there may be traffic snarl ups or accidents.

Telcos should move away from perceiving themselves merely as industry verticals and consider creating industry horizontals with non-competing but complimentary industries such healthcare and education.

By partnering with healthcare service providers such as doctors and hospitals, telcos can help establish databases that are accessible over their broadband networks to enable mobile users to schedule appointments with their doctors, gain access to their personal medical records and have a record of their vital signs stored on their mobile devices.

With the penetration of mobile devices reaching over fifty percent of the population, this presents are great opportunity for telcos to partner the government and send out social messages that concern all Kenyans such matters related to health, national security, crime and so on.

The opportunities are endless for telcos to reengineer themselves and aggressively pursue new sources of revenue.