With the release of Safaricom’s Financial results for the period ended 30th September 2018, three of their main services, M-PESA, Mobile data and Fixed services remained as strong growth drivers which contributed to 95% of total service revenue growth.
Late last month, Safaricom announced that they would will not be imposing tax charges on Data bundles below Kshs 100 but will be passing the tax cost on data purchased above the said amount. This was after the government said they would increase taxes on telephone and Internet services according to the Finance Act 2018 where telephone service providers are to pay more tax following thr increase of price of voice calls and data by 30 cents and SMS by 10 cents respectively citing the excise duty tax.
Statements from both Charles Kare, Director, Consumer Business Unit and Sylvia Mulinge, Chief Customer Officer at Safaricom have affirmed that despite the increase in tax, they would do everything as a brand to make sure that customers are affected as little as possible as they bring up new campaigns suitable for customers needs as well as try to absorb part of the tax burden.
1. According to Charles Kare, before the finance bill was read, Safaricom was on mobile paying 15% VAT and 10% excise duty translating to Kshs 26 from every Kshs 100, while on Fibre Business, there was 15% VAT and zero excise duty translating to Kshs 150 in every Kshs 1000
‘’The VAT remained at 16% but the excise went down to 15% and basically because of the tax on tax, for every Kshs 100, the government is taking Kshs 33.4. So basically the taxes have moved from Kshs 26 to Kshs 33.4 on mobile, this is like 7.4 per cent increase on taxes. So for every Kshs 100 we are paying the government Kshs 7 extra on the mobile side.’’ Charles explained.
2. Customers can reactivate their data upon expiry starting midnight 24th October 2018.
Safaricom said the decision had been necessitated by the frequent question from customers who ask why they cannot access their data bundles which they have not used after it has expired.
‘’We have made a decision as a company that effective midnight tonight, customers will be able to reactivate their expired data bundles by simply just buying a new one and if you are not able to buy at that particular time, we will hold it for you, kind of freeze it or pack it for you for a week as you organise yourself. And once you come back to the network and you top up you will be able to get back everything,’’ said Sylvia Mulinge.
3. Customer satisfaction remains despite the tax burden.
Speaking to Sylvia Mulinge at the announcement of the results last week, she said that Safaricom is continuously trying to make sure the customer can still afford to communicate despite the crunch.
“We passed on the tax on voice as well as out of bundle data but if you look at our data price points, for example, if you buy 100 MB or a 1GB bundle, you buy it at the same price as you would before, meaning we’ve absorbed the tax on behalf of the consumers. Data has become such a critical channel for communication for our customers and even with the increase in tax, we still wanted to make it more affordable to them.
On voice, while we passed on the increase in tax to voice, we also introduced a new bundle which essentially has customers buying a bundle where they spend 18 shillings for 18 minutes where they can talk to their friends, family and loved ones at 1 shilling per minute, which is a win-win solution for the customers. We continue to provide propositions that make it easy for their wallets and lifestyles.
Do you foresee a price war in the short run?
“As Bob said earlier, we don’t focus on the prices, we focus on our customers and the reason that we’re making the changes you’ve seen so far is because we listen to our customers who have told us that times are tough, it’s not easy for them to manage the disposable incomes that they have and their wallets are shrinking, so we are doing our part in the journey of making sure they stay connected,”
What about Post-pay customers who always complain that they are left out of campaigns?
“If you look at the integrated bundles off our Safaricom Platinum proposition, you can see that it was clearly targeted for the post-pay customers with the additional benefit of lucrative data options and discounts at selected franchises, thus giving them a lot of value for their money. But over and above that, in the month of October, post-pay customers were given a 10% off their bill just as a way to appreciate them for choosing our services.
What about the Masoko? It’s one of the products that hasn’t quite picked up
“It’s a new territory for us and new territories take a while to pick up and we’re not afraid to say that we’ve done a few wrong things or messed up in a few areas, but we take from our mistakes and better our services from those mistakes like the challenge we had with logistics, vendors who were not delivering the right quality which was compromising on the brand and we had to take a few steps back and begin to fix those things. I believe the Masoko that is coming up now is a Masoko that is resilient and has taken the lessons from the challenges that we’ve had we’re building a stronger brand that the consumers can trust.
Look at the Big Box that we launched a few years back that was part of the fibre home journey, it didn’t work! But look at the numbers we have now. From the results, we now have over 30,000 new customers connected this year and over 79,000 customers connected so far. We use the lessons from our failures to make us better and I’m confident Masoko will surprise you soon.”