Statement by Safaricom CEO on price adjustments

Posted on September 30, 2011



Mr Bob Collymore, Safaricom CEO

As you are no doubt aware, our country Kenya is facing one of its most difficult and challenging economic situations in recent years.

The overall rate of inflation now stands at 17.32% for September, the highest it has been since 2008 and the attendant devaluation of the Kenyan shilling can only be said to be reminiscent of the economic downturn witnessed in the nineties and the period following the last general elections.

It can however be said that the macro- economic situation in Kenya has been driven in large part by the global economic downturn that continues to affect major global economies, with recent examples being the current economic crisis that the European Union is now confronting.

Closer home, the last few months have seen a rapid decline in the value of the Kenya Shilling versus internationally traded currencies, in particular the US dollar, against which our currency has devalued by over 25% as compared to the same time last year.

This in turn has contributed to significant volatility in the price of petroleum products, with the benchmark cost of diesel fuel, which powers the Kenyan economy, rising by over 27% in the last nine months alone.

Due to the nature of our business, which is heavily reliant on both the regular importation of US dollar-denominated capital equipment and a very high dependency on energy sources such as the national electricity grid and diesel fuel to power our extensive telecommunications network, we have seen our operational costs escalate month on month to what we now feel to be unsustainable levels in the context of our operatin

g environment.

It is for these reasons that I would like to formally announce our decision to adjust our retail voice tariffs with effect from Saturday 1st October 2011. In coming to our decision on the level of the tariff adjustment, we have taken into account the sentiments of our customers: that they too are facing tough economic times and that they too need some respite in the face of the rising cost of living.

To this end, we intend to implement a marginal price increase of KES 1/= per minute on all our headline voice tariffs. This means that with effect from midnight tonight, it will cost our PrePay customers KES 4/= per minute for Safaricom to Safaricom calls between the peak hours of 8:00 am and 10:00 pm and KES 2/= per minute during the off peak hours of 10:00 pm to 8:00 am, while calls to all other networks will cost KES 5/= per minute.

For our PostPay customers, Safaricom to Safaricom calls between 8:00 am and 10:00pm will cost KES 4/= per minute, while calls made between 10:00 pm and 8:00 am will cost KES 2/= per minute with calls to all other networks charged at a flat fee of KES 4/= per minute.

Other tariffs that are impacted by this price adjustment include our international calling rates, the details of which we have made available on our website and which will be published in the local dailies tomorrow.

I would like at this point to make it clear that there will be no adjustment on either our SMS or data tariffs and that our mode of charging for voice services remains per second billing to ensure that our customers only pay for what they use.

This is the first time in Safaricom’s 11 year history that we have had to effect a price increase on our retail voice tariffs. This is perhaps one of the most difficult decisions that my management team and I have had to make, not least because we understand fully well that it is not good news f

or our customers.

I assure you that in coming to this decision, we have done our best to acknowledge and indeed show solidarity with the tough times that all Kenyans are facing, while at the same time balancing the need to ensure that our investors, majority of whom are Kenyan, know that we are committed to delivering value to them in a sustainable manner.

In tandem, we have tried as much as possible to moderate the effect on our customers who are already heavily constrained by the unprecedented rise in the cost of living.

Almost all the goods that constitute the CPI (Consumer Price Index), especially essentials like unga, sugar, electricity and petroleum products have recorded a price increase, with our industry being the only exception.

Posted in: Uncategorized