Airtel Africa has launched a fresh bid to scale down expenditure on agencies that handle its integrated marketing and communication services.

Among the services that have been hit by the freeze on spending include media relations, client service, public relations, media buying and creative. 

In an interview with Financial Journal, Airtel Africa Head of Communications Michael Okwiri acknowledged a change of approach in the way Airtel Africa does its business.

"We are restructuring these services. We are looking at it from another angle," Okwiri said.

"For instance, rather than retaining several executives managing the brand, we want to scale down to one."

While the move is largely seen as aimed at cutting costs in the face of cutthroat competition in the telecoms sector, Okwiri insists the it is informed more by strategy than the need to keep tabs on expenditure.

Internal resource power

"The decision is expected to increase efficiency across Airtel’s African operations and improve customer services," he says.

"The structure is evolving to best match our needs. We intend to utilise both our robust inhouse corporate communications resources, coupled with some external support from the PR agency partner."

In June last year, Bharti Airtel appointed Ogilvy Africa BV — Ogilvy Africa — as its marketing services partner for the African region.

Ogilvy Africa, part of WPP, and Millward Brown and Hill & Knowlton, have since handled Airtel’s integrated marketing function. Airtel search for a pan-African agency meant it had to sever ties with ZK Advertising, a smaller pan-African firm that has handled much of the company’s brand since it’s purchase by Celtel in 2004.

In 2008, the mobile firm underwent a brand change from Celtel to Zain at a cost of $28 million. When the same company was making the transformation from KenCell to Celtel in 2004, the exercise was estimated at $30 million.

Airtel is seen to be shaping a deliberate pattern — that of outsourcing core and technical aspects of their trade while internally taking onto non-technical areas.

In the recent months, Airtel picked IBM, Tech Mahindra and Spanco as partners to deliver key parts of its customer services in Africa.

This move is largely primed to increase operational efficiency on the one hand and minimise costs of non-core areas on the other.

According to Andrew Mutuma, chair of Chartered Institute of Marketers (CIM), the decision to cutback on expenditure may exact a dent on the revenues of media and advertising agencies as well as media firms. 

Airtel’s ceiling on expenditure is aimed at balancing out the low tariff the mobile operator charges in its drive to grow subscriber numbers in a market dominated by Safaricom, says Mutuma.

First option

"Of course a low-cost model as executed by Airtel cannot support revenue growth if the change in subscriber numbers remains hugely insignificant," he says.

"The ongoing price war is not healthy for the growth of the economy as well as media."

He says the fact that subscriber numbers of some of these telecoms have not grown notably despite the price wars, means they will start optimising cost and the first thing on the cards will be cutting ad spend.

Echoing Mutuma’s sentiments Telkom Kenya Head of External Communication Angela Mumo says faced with the zero-sum game of optimising costs; the first casualty will be advertising and marketing spend.

— Patrick Githinji