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New telecom may reignite price wars

“What would you call us?” asks an advert on TV.

 

Well, we may not know its name, but its business is known. It is a new telecom company, expected to officially announce arrival on the Ugandan market next month. The entry is likely to set the stage for a price war on tariffs, according to an expert at Makerere University.

The company has started with extensive advertisements, promising big prizes to whoever will give them a name.

“Give us a name,” it says.

On its website, hundreds of Ugandans have suggested a range, including Global telecom. But the firm will enter a local market that feels clogged – with 17 million subscribers, according to Uganda Communications Commission. UCC has a list of close to 40 licensed companies in the sector, but only a handful – less than ten companies – can be seen to be actively engaged in the market.

Companies like Smile telecom and K2 telecom have struggled to grab a reasonable slice of the market, although it’s perhaps too soon to judge the latter.  Smile telecom, for instance, was licensed to provide voice (fixed telephony) and SMS services around Kampala, according to UCC data.

With the market not responding well, the telecom firm now focuses on data. Smile recently launched what it calls the fastest internet service. K2 telecom, licenced last year, is yet to make its presence felt. Analysts, however, say there is still space for a new player.

Mark Kaheru, a market analyst, told The Observer that there were still very many gaps in terms of service provision that if any new player promised to fill them, a big crowd could swing in their direction.

“Sometimes I spend two days without network,” Kaheru says, “if we get a new entrant who can provide better services, I will be the first to move.”

He adds: “Many people are fed up with the available networks.”

Telecom firms continue to experience dropped calls and on and off networks, among others. Dr Peter Turyakira, a senior lecturer in the department of Marketing at the College of Business at Makerere University, says the market can never be saturated.

“Customers have no permanent places,” Turyakira says. “Today you have them, tomorrow they have moved to someone else. It will really depend on the marketing strategy of the new entrant; they will have to study the market and know whether Ugandans are price-sensitive or quality-sensitive.”

However, the new telecom firm will have to watch the cost of trying to woo customers already firmly married to one of three major providers.

The defunct Warid telecom employed a strategy of low call tariffs, which attracted large numbers. Warid, however, paid a price; it sold its entire stake to Airtel amid reports the firm was struggling.

amwesigwa@observer.ug

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