Will India’s Airtel exit the Kenyan market like Essar and Orange did?

**Airtel Shop on Banda Street taken on 23rd January 2017. [PHOTO:WILBERFORCE OKWIRI/Standard]**

Airtel Kenya may join the ranks of telecommunication firms that came, saw but failed to conquer Safaricom.

Recent developments at the Indian-based company have raised eyebrows on its future in Kenya, with the signs pointing to a possible exit or merger.

On Friday, the chairman of Bharti Airtel, Sunil Bharti Mittal, told Bloomberg that his firm was “considering mergers or stake sales at some of its Africa operations as it looks to cut debt and make its biggest overseas acquisition profitable”.

Speaking at the World Economic Forum in Davos, Mr Mittal said this process would be completed within a year, and would affect some of Bharti’s businesses in 15 African nations.

It was not immediately clear if Airtel Kenya would be affected.

The telco entered Africa through the acquisition of Kuwait-owned Zain Group’s assets in 2010. At the time, the deal had an enterprise valuation of $10.7 billion (Sh1.1 trillion at current exchange rates).

Since then, in addition to having sold its operations in Sierra Leone and Burkina Faso, Bloomberg noted that Bharti has sold some of its tower businesses.

Significant changes

Generally, business in Africa has not been smooth for the world’s third-largest mobile phone operator.

Airtel’s African unit lost $91 million (Sh9.4 billion) in the quarter to September 2016. This was, however, an improvement from a $170 million (Sh17.6 billion) loss over a similar quarter the previous year.

The narrowing loss was attributed to growth in data customers and consumption, cost-cutting measures, as well as currency stabilisation in most African markets.

The firm is scheduled to present its latest financials for the three months to December 2016 today.

In Kenya, Bharti’s performance has largely been no different from its operations in the continent.

While Airtel Kenya is the second-largest player in the market, it has not registered a profit. This is despite the sector’s market leader, Safaricom, posting a profit of Sh38.1 billion in its latest full-year results to March 2016.

Airtel Kenya recently made significant changes in its operations, indicating there may be something big in the pipeline.

Last week, the telco laid-off about 86 permanent employees and another 76 temporary staff in an effort to stay afloat.

This followed an earlier retrenchment that saw the firm send home 60 employees last year.

The company is also reportedly planning to abandon its warehouses in Nakuru, Kisumu, Eldoret, Mombasa and Nyeri, with everyone now expected to be served from its headquarters in Nairobi.

Some shops, like the one at The Oval in Nairobi’s Westlands, are also set to be closed, as the firm seeks to reduce the number of outlets countrywide.

The telco, which moved its central operations from Parkside Towers along Mombasa Road to The Oval in Westlands, is also set to return to Parkside, which it left in 2015.

Directors’ exits

Sources familiar with the issue, but who asked not to be named as they are not authorised to speak to the press, added that some departments, such as Airtel Money, Enterprises, Customer Service and Sales and Distribution, will be merged.

In addition to its financial issues, Airtel Kenya is also facing leadership shake-ups as it witnesses the exodus of directors.

Charles Wanjohi, who was instrumental in the development of the UnlimiNET product, left for Safaricom. He was replaced by Levy Nyakundi, who later left for Orange.

Jose Crimeux, a customer care director, left after the company failed to renew his contract, while Kobi Adams, a sales director, left after failing to impress.

Last week, some managers who spoke to The Standard said the talk within Airtel’s corridors painted the picture of a company looking to “sanitise” its books to enable a smooth transition.

They said the company had already sold most of its masts after failing to make incursions into the local market, where Safaricom has a market share of 68.9 per cent, according to the latest data.

“Word has it that [Airtel] is winding up, having sold most of its towers, not making profits and a very expensive operating licence,” said one of the sources.

Airtel Kenya, however, saw its market share increase in the third quarter of last year, according to Communications Authority of Kenya (CA) data released last week.

After two straight quarters of a decline in numbers, Airtel acquired 178,840 new subscribers (though this is against Safaricom’s 669,594), giving it a market share of 17.5 per cent. This was an improvement from 16.6 per cent the previous quarter.

Airtel recorded 6.7 million subscriptions during the quarter CA reviewed, up from 6.5 million subscriptions posted in the previous quarter.

When contacted for comment, Airtel did not confirm if it is planning to leave the Kenyan market, and instead issued a statement on the layoffs.

“Airtel Kenya is undertaking strategic organisational restructuring to improve efficiencies across functions, with an aim to enhance customer experience. This initiative will impact some roles that will be merged or become redundant,” the telco said.

Airtel Kenya is said to have invested about Sh25 billion in the last five years in a bid to boost its market share. This, however, has not had the effect anticipated.

Last year, during a tour of Africa, Mittal announced that Bharti Airtel would invest Sh19 billion ($190 million) in Kenya from April 2015 in a move aimed at giving Safaricom a run for its money.

But for some critics, Airtel has made some strategic blunders that have hurt its potential in the local market.

Insiders identified wrong or delayed marketing decisions as one the company’s blunders.

For instance, on designing Airtel UnlimiNET, an attractive offering that bundled data, voice calls and SMSes, Airtel made a mistake its predecessor did. Its package did not cater for the mass market – that large population of Kenyan subscribers for whom buying airtime might mean going without food. The cheapest plan at the launch cost Sh50.

It was not until a year later that Airtel unveiled UnlimiNET 20, but by then, it might have been too late.

Brand ambassador

The company also spent millions of shillings on Ivorian soccer star Yaya Toure as its brand ambassador, who has yet to come to Kenya to promote the brand. Mr Toure’s only visit to the country was to Mombasa on holiday.

Insiders add that Airtel erred when it allowed Safaricom to buy Essar’s yuMobile spectrum and infrastructure, which helped Safaricom secure a 4G licence.

“Unplanned cost-cutting measures led to low budgets in key departments, such as marketing, sales and network,” said a source, who added that the Sh500 million case against Kenya Revenue Authority (KRA), in which the court ruled in favour of the taxman, also hit Airtel badly.

Equity Bank’s Equitel, a mobile virtual network operator which runs on Airtel’s network, is also said to be eating into Airtel’s subscriber base.

This is especially the case with mobile money transfers where Equitel, which is less than two years old, has overtaken Airtel Money, which has been around for more than six years.

According CA statistics, Equitel closed the July to September quarter of last year with 2,090,284 subscribers. Airtel Money, on the other hand, had 5,861,480 subscribers.

However, the number of Airtel Money transactions (all the sent and withdrawal transactions from mobile customer accounts in the three months) at 9,083,467 pale against Equitel’s 63,962,984 against.

Further, the value of Equitel transactions in the period under review stood at Sh219 billion against Airtel Money’s Sh10.8 billion.

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