Bumpy road as Safaricom seeks regional expansion

Safaricom Chief Executive Bob Collymore. [File, Standard]

Safaricom last week held its annual general meeting and for the first time in a long while. Shareholders were presented with the option of voting on amending the company’s Article of Association to reflect recent developments at the top shareholding.

The changes allowed Safaricom’s parent company Vodafone Group to consolidate 35 per cent of its shareholding previously held in Safaricom under its South African subsidiary, Vodacom Group.

Safaricom CEO Bob Collymore welcomed the shareholders’ vote as the final blessing for the firm’s growth strategy of spreading into under-served areas of the region with targeted solutions for each of the markets.

“These changes have freed Safaricom to take the over-the-top services into other markets,” he said at the sidelines of the AGM last Friday at the Bomas of Kenya.

Mr Collymore, however, remained guarded about any specific roll out plans the company might have due to strategic reasons.

Earlier this month, he told British newspaper Financial Times that the telco would initially target East African countries, primarily Ethiopia, although West Africa was also on the cards.

Safaricom might, however, face several pitfalls in its quest to gain a foothold into Ethiopia currently served by Ethio Telecom, the state-owned monopoly that controls fixed, mobile, Internet and data services.

In late 2015 Ethio Telecom’s Chief Executive Andualem Admassie told a panel discussion at an international business forum that Ethiopia was not yet ready to open up its market for a second mobile service provider.

“The answer for your question is Ethiopia planning to open telecom sector for foreign operates is no,” Dr Admassie was quoted by sections of the local press as saying.

“We don’t open telecom sector for foreign companies because we need to use the money from the sector as enabler of the growth of the country. We circulate the money in the economy. We don’t want to let in foreign operators and allow the profit from the sector leave the country,” he said.

Liberalise

Information rights groups accuse Ethiopia of resisting changes to liberalise the country’s telecommunication airwaves to facilitate state censorship and information control. In the last one year, Ethiopia is said to have shut the Internet down at least three times as part of crackdowns on journalists and dissidents, with the latest lasting more than a week.

While such a shutdown might be easy to achieve in a country where only one state-owned monopoly operates, a private and nimble entity such as Safaricom headquartered in Kenya might present an additional challenge to rein in.

Other challenges that Safaricom might have as it seeks to set a foothold in other markets include the pressures regulators tend to place on foreign companies that come from countries that are considered to be economic rivals. South Africa and Nigeria have had a simmering feud over the past several years that has often spilled into the diplomatic and corporate scenes.

In 2015, Nigeria’s telecommunications regulator, the Nigerian Communication Commission (NCC) slapped MTN Nigeria, a subsidiary of the South African telecoms giant MTN, with a record $5.1billion (Sh510 billion) fine for failing to meet a 12-month deadline of de-activating unregistered SIM cards.

Switch off

The Nigerian government had embarked on a campaign to switch off unregistered SIM cards used for illegal activities including by the agents of the Boko Haram militia that terrorises parts of the country with kidnappings and bombings. The fine was eventually negotiated down to sh170billion.

Safaricom’s CEO Bob Collymore was, however, upbeat that the company is ready to take on the challenges brought on by expanding into other markets and that its competitive offerings will stand it in good stead in the face of competition.

“The project we conducted in 2015 to bring M-Pesa home was one of the most ambitious IT projects on the continent. It was not a one-off project but a continuous one and that is why we’ve been having additional upgrades,” he explained.

He said the improvements have helped introduce new offerings for consumers in the M-Pesa ecosystem.

“Currently we are developing and trying a self-reversal function such that if you accidentally send money to the wrong number you can initiate the reversal yourself or the person that receives it can initiate the reversal,” said the CEO.

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