This is still significantly higher than the Ksh0.88 (1.1 US cents) it costs to complete a call in Kenya, according to a network cost study by Analysys Mason.

For investors, the current situation is a real puzzler. What will be the long-term effect of this price war and how are operators going to be affected? With the exception of Bharti, the other operators think the current pricing is not sustainable.

Nothing signals this more clearly than Safaricom’s half-hearted response to Bharti with a complicated menu pricing option.

Teenagers and churn

Indeed, Safaricom’s outgoing chief executive Michael Joseph told The EastAfrican that the current rates are not sustainable unless each subscriber increases the volume of their calls by a multiple of 10.

This raises the question that, as much as the price war has generated a buzz in the market with people switching networks, is the demand for calls really going to grow exponentially?

Analysts say the new tariffs will certainly encourage more people to call However, as with everything else in life, the demand for calls will plateau at some point even if the services are offered for free.

The present risk is that consumers will hit threshold quicker than the operators anticipate and start reallocating the money they have saved to buying unrelated products such as soda and beer.

Coca Cola and EABL suffered a similar fate when mobile phones were first introduced in Kenya, and they could enjoy a reversal of fortunes as consumers start spending the savings on their mobile phones on drinks.

This problem is more acute in the East African market because most of the new subscribers are either price-conscious teenagers or rural folk.