Safaricom: The juggernaut you can’t avoid

By MACHARIA KAMAU

The first time Safaricom’s shares traded at Sh9 was during the euphoria of its initial public offer in 2008.

Kenyans, having learned from the KenGen IPO, discovered the way to make a quick buck was to buy shares during an IPO and then offload them quickly to make a tidy return.

This trick worked for some investors. But for the majority, they held onto the shares they bought at Sh5 during the IPO, and endured a painful ride as their shares lost value. Most finally sold at a loss.

Over the past month, however, Safaricom’s shares have hit an all-time high of Sh9.40.

The mobile phone services provider reached a market valuation of Sh360 billion, which is just slightly more than what China advanced Kenya to build the Mombasa to Malaba standard gauge railway line.

In the five years since it listed, Safaricom has gained an omnipresent reputation.

The mobile phone company, which had 19.4 million subscribers by March, has dipped into every sector imaginable in Kenya’s economy: agriculture, health, finance, education, transport, tourism and more.

But this larger-than-life image has also made the company an easy target for legal suits over patent infringements.

The firm has also in the past been at loggerheads with the Communication Commissions of Kenya (CCK) over its size. In 2011, CCK wanted to declare the firm dominant, with plans to subject its products and services to special regulations.

Robert Yawe, the managing director of Kay System Technologies, said Safaricom’s size, if not abused, has a beneficial trickle-down effect on the economy.

“For instance, in its distribution network, it has more than 65,000 agents, which essentially means its business support structure has created over 65,000 SMEs,” he said.

It is this sheer dominance, which seems to be reflected in its share price, that led analysts from Renaissance Capital to ask tongue-in-cheek last week: “What is keeping (Safaricom’s) Management awake at night?”

The analysts went on: “It appears to be plain sailing at the company, if one looks at the share price.”

They noted, however, the stability of the M-Pesa platform, the other mobile phone services providers coming together to fight Safaricom (although quite unlikely) and power interruptions as the three things that would keep CEO Bob Collymore and his team up at night.

A number of analysts in the local stock market have predicted Safaricom’s share price will hit Sh10 by the end of 2013.

But by that time, it seems, millions of  shares will be in foreign investors’ hands.

These are just some of the sectors where Safaricom has proved it is more than a telecommunications firm.

Mobile Money/financial services

Safaricom’s money transfer platform M-Pesa is synonymous with mobile money in Kenya. Launched in 2007, M-Pesa became wildly successful and countries and operators across the world have tried to design payment products fashioned along the lines of M-Pesa.

The platform has grown from a basic money transfer service to a financial services tool. Utility firms, banks, retail chains and other service providers have tapped into the system, enabling their customers pay their bills or make deposits using it.

The firm has been drumming up support for its Lipa na M-Pesa service, which allows small traders to accept payment for goods and services.

In November last year, Safaricom launched M-Shwari. The service, run in partnership with Commercial Bank of Africa, enables M-Pesa customers operate a bank account using their phones. Key features of the service are its interest-bearing deposits and the micro and short-term loans of between Sh100 and Sh20,000 extended at a 7.5 per cent fee.

A month after the service was launched, it had attracted savings in excess of Sh1 billion and advanced Sh140 million in loans.

Safaricom said it had more than 1.2 million active customers using M-Shwari by the end of March 2013. This means in just four months, the facility’s customer base rivalled that of some banks that have been operational for years.

Education

The telco has an e-learning service referred to as Safaricom Blackboard, which positions it perfectly for the digital drive in education. The service provides educational materials for both students and teachers, and eases school management functions.

The service started as a pilot at the Starehe Schools last year and enables teachers record lessons and store the content on the Safaricom Cloud.

It allows students and teachers in any part of the country access this material online through the Safaricom Blackboard at a fee.

Health

The firm has made attempts to address the skewed doctor to patient ratio in the country and forged partnerships with health services providers. Daktari 1525 is a dial-a-doctor service that allows customers to get medical help from qualified doctors by dialling 1525.

The service is a partnership with Call-a-Doc Ltd,  which is run by professional doctors and disseminates medical information using modern communication methods.

Safaricom offers the platform and connectivity while Call-a Doc offers the expertise.

Callers are charged a premium rate. The service is unavailable at the moment, however, with Safaricom saying it is undergoing an upgrade to better the service.

Health Telepresence, is another product offered in partnership with Cisco and insurance provider AAR that enables patients access professional medical care through video conferencing.

The product links up patients in far-flung areas with medics through video conferencing. This means patients do not have to incur travel costs to access healthcare.

Insurance

In late 2012, Safaricom launched a health insurance service targeted at low-income households. Linda Jamii, which is a partnership with Britam and Changamka Health, targets over 30 million Kenyans that do not have health insurance. Families pay Sh12,000 a year, and can pay in installments.

Entertainment

When Skiza Tunes started out, many thought it would flop as it was deemed unprofessional. The service allows subscribers to entertain their callers with music. This means that when you call a number, instead of the usual dial tone, a song plays — sometimes it is catchy, other times outright annoying. Skiza Tunes has grown in popularity and is now a cash cow for not only Safaricom but also the artistes whose songs are selected.

Transport

In June, Safaricom started a pilot programme dubbed Vuma Online. It installed wi-fi routers in matatus, transforming them into mobile cyber cafes and giving commuters with smartphones access to the internet. The firm said it would spend Sh7 million on the pilot and install routers in about 200 matatus plying different routes across Nairobi.

It has proved so successful that along some routes, passengers wait for a Vuma Online matatu and gladly pay higher fares. And as a result of the demand, some PSVs have taken to duping passengers that they have wi-fi.

There are plans to start charging the matatu operators a monthly Sh1,500 fee for the service.

Safaricom has also launched applications and supported initiatives in agriculture, solar energy, conservation, water, arts, sports and disaster relief.

emacharia@standardmedia.co.ke