Safaricom Plc - SMS - No one is texting - October 2018
Short Message Service (SMS) - “No one’s texting” is the 3rd part of our 6 part series report titled “Is Safaricom losing its grip?”
In the 1st part - “Pricing Power Explained” we explained the concept of “pricing power” which we defined as the ability of a company to raise prices over time without reducing demand for its products.
We used the Herfindahl Hirschman Index (HHI) theoretical framework to determine each business line’s concentration levels and identified the levels of Safaricom’s pricing power in each business line.
We covered Voice calls - “Dialing the Wrong Number” in the 2nd report and concluded that Safaricom does not hold pricing power as downward tariff adjustments by the competition results in a significant loss of market share as customers are highly price sensitive.
In this report, we conclude that the SMS market is highly concentrated and by analyzing SMS traffic market share we identify Safaricom as a dominant player possessing strong pricing power.
SMS traffic volumes are on a decline across the telecommunications industry however, as is the case with voice calls because of a growing shift to over the top services (described in the report).
Person to person (P2P) SMS traffic has been declining while that of business to person (B2C) is increasing.
Finally, we conclude by mentioning the negative impact of declining traffic volumes on SMS service revenue. Download Report