Last week Safaricom made a bold move and announced the 'no-expiry data' tariff plans – contrary to global practice in the mobile data service provision.
In some earlier blog, I had argued that mobile operators do need to have expiry dates on their tariff plans in order to better make financial as well network congestion projections.
So it did come as a shock to discover that Safaricom was willing to throw away the standard old practice of expiring Internet data bundles. This got me wondering about what could be the rationale and game plan unfolding in the telco sector.
In Ghana, the judiciary had just ruled that mobile operators should not expire data bundles. Locally, there are several pending suits to be heard and determined on the same issue.
Did Safaricom jump in order to pre-empt an anticipated push from the local courts?
Of course the CEO does not agree and has said as much on local media, explaining that they are simply rebranding in line with their new commitment to be simple, transparent and honest.
Being the sceptic I am, by virtue of my training as an academic, I sought to find out by myself by comparing the tariffs offered for expiring data bundles with those that do not.
Its was a bit difficult to get a one-to-one comparison since the tariff structure for expiring data bundles varies greatly depending on size and expiry time.
However, some notable comparisons included the fact that if you spend Sh99 for bundles that expire within a day, you will get 1,000MB (1GB) of data bundles compared to 495MB (0.5GB) of data with no expiry date.
This being the case, it does look like non-expiry of data comes at a cost – you potentially lose 50 percent of your data bundle if you opt to not expire bundles.
However, this rule does not seem to hold at the more expensive, high-end data bundles range.
As an example, if you chose to spend Sh1,000 for bundles that expire within a month, you will get 5GB of data bundles compared with the same 5GB of data without expiry.
It appears Safaricom is playing the usual game of making money at the bottom of the pyramid - having understood that the majority of its millions of subscribers will be buying bundles at the lower end of the bundles spectrum.
It is called understanding the ‘kadogo-economy’. If a certain class of consumers cannot afford one kilogram of meat, simply break down the meat into smaller packages of half or a quarter kilo and suddenly you activate some latent demand that was untapped.
The only issue, of course, is that the unit cost of the service is higher for those buying in small quantities as opposed to those buying in bulk. But that is just the nature of business – willing buyer, wiling seller models.
In other words, Safaricom has managed to turn a contentious conversation around expiring data bundles into some business opportunity by providing consumers with the options to either expire those bundles or not.
Depending on the amount you are willing to spend, the NO-expiry option may cost you significantly or it may have no impact.
Additionally, Safaricom seems to have pre-empted the court proceedings since whoever filed the petition to force mobile operators to stop expiring bundles may find their petition punctured.
Finally - and perhaps Safaricom’s target for this new initiative – the competitors Airtel and Telkom Kenya are being challenged to avoid expiring their bundles. They however lack the financial clout to sustain loses in the event that such a decision becomes detrimental to their financial position.
We are indeed living in interesting times as far as developments in the Telco industry is concerned.
Mr Walubengo is a lecturer at Multimedia University of Kenya, Faculty of Computing and IT.
Email: [email protected], Twitter: @Jwalu