“Absolutely not.”
That was the sharp response given by Safaricom’s Interim Chief Executive Michael Joseph when asked whether the leading telco’s renewed strategy was a reaction to market rivals gaining an edge.
Last Wednesday, Safaricom scrapped the expiry of data bundles, airtime for voice calls and text messages. This is on the back of a confirmed merger between rivals Airtel and Telkom.
“It has nothing to do with anybody except ourselves trying to relook at Safaricom and rethink our strategy. Whether Airtel is merged with Telkom makes no difference to us at all,” Joseph told reporters during the 19th-anniversary celebrations on Wednesday.
But could Safaricom’s founding CEO be wrong or just putting on a brave face even as he very well knows that the ground is shifting?
Lately, Airtel has been gaining ground, growing its market share. While the operator owned by India’s Bharti Airtel is still a distant second to Safaricom, it has over the recent past grown its number of subscribers in a manner that cannot go unnoticed.
The firm has increased its share to 25 percent in June this year, up from 15 percent in June 2017. Safaricom, on the other hand, has reduced its share to 63.5 percent in June 2019, compared to 72.6 percent in 2017.
What is even more unsettling for Safaricom is that its customers are also not eager to make lengthy calls on the network maybe due to higher calling rates.
Communications Authority (CA) in its quarterly report on the industry, noted that Safaricom’s subscribers spend the least amount of time when making calls, at an average of 1.2 minutes for on-net calls while subscribers on rival networks spend as much as 3.5 minutes.
“During the period under review, the average number of minutes of use per call for on-net and off-net local mobile voice traffic stood at 1.6 and 0.9 minutes respectively. Airtel Networks recorded the highest number of minutes per on-net call at 3.5 minutes, whereas Mobile Pay Ltd recorded the highest off-net minutes per call at 2.0 minutes. Safaricom recorded the least average number of minutes per call for both on-net and off-net at 1.2 and 0.6 minutes respectively,” said CA in its report to the quarter ending June.
The new plans by Safaricom will see customers purchase talk time, data bundles for as low as Sh1 and as a “permanent proposition” they will get 50 per cent extra talk time with every purchase.
Neglected customers
The new plan came after years of incessant customer complaints and a legal suit filed by a lawyer against Safaricom, Telkom, and Airtel over the expiry of data bundles. While he may not want to concede that his firm is facing an increased threat from companies that he may have written off in the past, Joseph has his worries on Safaricom’s market position.
He admitted that Safaricom, in light of its market leader tag, had to some extent neglected customer concerns, and that’s why the new strategy was aimed at being “simple, transparent and honest.”
“Because we are too successful we think nothing can touch us and whatever we do is right. This is something that concerned me when Bob passed on and I came back,” he said. “We have to understand who and what makes us successful. It’s not me, not the team here but the people who trust us and spend money on the Safaricom network That’s what drives Safaricom and we must never forget that.”
Joseph acknowledged that they had lost market share to rivals Airtel but condescendingly termed it as a non-issue saying that their renewed direction would soon wipe out Airtel’s gains. “Everybody who’s losing market share is concerned,” he said.
“I believe the steps we’ve taken today we’ll reverse that trend. The latest figures from Communications Authority show we had gained market share so I don’t see that as an issue. But of course, we wouldn’t want to be the only company in Kenya with a 100 percent market share when the combination of Telkom and Airtel happens, they’ll certainly increase their market share.”
Airtel and Telkom announced plans to merge early this year. Though the plans have faced delays, resulting in the shelving of implementation of key strategies and causing jitters among employees, the two entities earlier this week said they are optimistic that the deal will be completed by end of the year.
Safaricom had written to CA with some reservations on the merger and requesting payment of the debt that it was owed. Joseph, however, said that he did not object to the merger but asked for an equitable share of the spectrum.
“Our opinion was simple, if we are going to have a merger then we want an equitable distribution of spectrum ... we are not objecting to the merger,” Joseph said.
While the market will have to wait and see how much of a force to reckon with the Airtel-Telkom combo will be, so ahead is Safaricom that the two firms only talk of being a viable number two in their merged status and offering the market a credible option to consumers.
“Merging some of our businesses with Airtel has significant benefits and will see us become part of a strong credible alternative to the dominant player in the market. It will introduce real competition in this market,” said Telkom Kenya Chief Executive Mugo Kibati. He spoke Tuesday when Airtel and Telkom met the Senate Committee on ICT to give an update on merger process.
“If the shareholders (of Airtel and Telkom) can join hands, the business will be more viable and we can create good second operator if we have the basics right,” said Prasanta Das Sarma, Airtel Kenya Managing Director.
The two firms, however, note they would still need to have a level playground, which would be achieved through the implementation of the dominance report.
The Telecommunication Competition Market Study in Kenya, which was commissioned by the CA in 2016 and completed in 2017, had made proposals that were expected to make the industry even. “Some kind of regulatory intervention will be required for the joint venture to be able to thrive and pass benefits to the consumers in the longer term,” Kibati said.
While the recommendations were hailed by Airtel and Telkom, Safaricom has taken issue with a number of them and has always used what has been a popular tagline to discredit them as punishing success.
“You could complain about dominance if you invest in a comparable manner to what Safaricom has done. If you don’t invest in the same manner then why are you complaining?” Joseph posed. “Why should we be penalised for investing heavily in Kenya and somebody is calling you dominant?”
The telcos have in recent past had to contend with growing competition from over-the-top mobile applications such as WhatsApp, Facebook, and others, which subscribers are using to make calls and send messages and in turn, reducing revenues from the traditional voice calls and text messages.
