Kenya’s largest mobile network, Safaricom, plans to shut down one of its postpaid services, saying the service’s tariff has shown non-performance three years after it was launched.

Safaricom chief executive, Bob Collymore, has said his company has already sent a letter to the Communications Authority of Kenya (CAK) notifying them of the intention to end the tariff.

“The Karibu postpaid plan is not profitable; it is a rich tariff where you get talk time, data and texts which are all being sold at below cost,” Collymore said.

“We have sent a letter to the regulator informing them of our intention to terminate it,” he added.

Safaricom has two post-paid options, where subscribers pay Ksh 1,000 or Ksh 2,500 per month.

The Kshs 1,000 option allows the subscriber to enjoy 900 minutes talk time on Safaricom to Safaricom calls, 100 minutes to other networks, 100MB of data and 100 on-net SMS.

“People on postpaid are essentially making calls at less than one shilling per minute. This rate is not only lower than the postpaid tariff we give to corporates, but also to prepaid consumers,” added Collymore, referring to the mobile network’s prepaid tariff calls for Safaricom to Safaricom calls that cost Ksh 4.

Also, because Safaricom’s postpaid tariff rates have not been increased over the years -- unlike that for prepaid prices in Kenya -- up to 140,000 customers have bought into Safaricom’s postpaid packages, signalling 30% growth for the company in this category.

Speaking to ITWeb Africa, Dorothy Mwikali, a financial advisory expert at investments firm Baobab Capital, said that this is the key reason for Safaricom ditching the service.

“When the service was introduced several years ago, the country was experiencing a very dynamic price war, something that made the telecom companies to come up with strategies to retain subscribers on their networks,” Mwikali told ITWeb Africa.

“We have since seen the price war cease, and we even witnessed Safaricom review its tariff plans upwards. The postpaid tariff was however not reviewed, meaning that postpaid subscribers have been enjoying very low call rates,” Mwikali added.

Mwikali said it is a tight balance for the telco between maintaining loyal customers who pay per month, and ensuring that the business remains profitable.

“Kenyans have discovered that the postpaid tariff is ridiculously low, and most of them have been shifting towards this monthly plan, explaining the recent 30% growth in new postpaid users,” added Mwikali.

“I think it will be interesting to see how the telco proceeds once they receive approval from CAK, as the competitors could ride on this and offer better postpaid rates in a bid attract those 140,000 post-paid subscribers onto their networks,” Mwikali concluded.