Safaricom early this week announced a Sh17.54 billion after-tax profit for the year ended March 31, 2013. Its revenues grew to Sh124.3 billion with M-Pesa contributing Sh21.8 billion, SMS Sh10.1 billion, data Sh8.4 billion and voice revenues being Sh77.6 billion.
First, this is a great performance and I guess the other telcos are shaking their heads wondering where they have gone wrong. I will compare and contrast what Safaricom is doing as compared to others later but first let me try to put the after tax profit into perspective. If you take the population of Kenya to be 45 Million, Safaricom can give each of them Ksh.377. In other words Safaricom makes Ksh.377 profit on every living Kenyan in a year. The other way to look at is terms what they make in a day. My calculator confirms that the figure is Ksh.48,054,794.52. That is over Ksh.48 Million profit in a day.
Safaricom closest rival in terms of huge profit is EABL. Their last financial report indicated that they made Sh11.18 billion from Sh9.02 billion the previous year. Safaricom had a bad year last year compared to other years in the recent time and even with that, they still made KES 12.63 Billion. Still far above what EABL announced last year. EABL is yet to announce the financial results for their current financial year and there is still a chance that they can compete with Safaricom.
I guess something is not right with other telcos operating under the same environment, competing for the same clients, and can’t make profit to save their skins. Airtel for example has been around for a while and has been the chief competitor for Safaricom for some time but they still just can’t get it right. Airtel market share has remained at around 16% with every report from CCK. I got my hand on report by Citi Research about Bharti Airtel Business in Africa and they do acknowledge that Africa is not what they expected
“We focus on Nigeria, Tanzania, Zambia, Uganda and Kenya (60% of Africa EBITDA) and believe that the business hasn’t panned out the way management or we had expected”
The assumption Bharti made was that Africa is exactly like India, which is not the case. I think they should have done some research first and maybe they would have discovered the peculiar calling habits of Kenyans. The same report indicated that their biggest regret was that they initially focused so much on voice and neglected Mobile Money:
“Bharti’s Initial focus on voice led to slow start/losing first-mover advantage in mobile money. Strategy has now been modified for Africa (on-net traffic/mobile money) vs. relying on the India model (sharp cuts/usage elasticity).”
The other countries like Uganda, there is still a chance to grab and take the lead on mobile money. But for Kenya things are different, Mpesa is synonymous with Mobile Money just like Google is with Search. I am not sure what Bharti Airtel would have done in Kenya to change the dynamics of mobile money in the country. Yu for example realized this asked Safricom loudly to open up Mpesa to other operators. Safaricom is not keen on doing it but I think making Mpesa open to other operators would be great for Safaricom. If they do open it up, I see a situation where the other operators abandoning their platform and adopting Mpesa. By default Mpesa would become the platform for mobile money for everyone. Safaricom seems to be happy to work with the Banks and not the other telcos. Looking at it purely on business point of view, banks are a safer bet as they do not offer direct competition threat to Safaricom.
For Bharti Airtel, I am still waiting to see what they will do to change things especially for the use of mobile money in Kenya.
On to Orange. Safaricom used to fear Telkom Orange, especially with matters to do with data. I don’t think it is still the case. Orange had inbuilt infrastructural advantage over their rivals. Their data speed and user experience was better than Safaricom from the word go. But then they somehow allowed Safaricom to take the lead on the Mobile and Fixed Data. Orange Mobile Data Market share by December 2012 according CCK stats was 9.1%. That is lower than Airtel 11.7% and cannot be compared with 72.6% for Safaricom. From what I have seen, Orange is a company in transition, although it is taking too long. Orange is stuck between the modernity which comes with proper functioning of a private company and sluggishness associated with Government Offices and Government Parastatals. In the recent past the Company has made some strides in hiring young smart guys to drive the business but there are still so many old Government type employees with you know what type of mentality. It is not making sense that a company in the same industry is making 17 Billion profit while Orange just last year was begging the Government and other shareholders for the bailout loan.
It is only Yu that can be excused and given time. Yu is new in the market and I think they have done quite well. Believe it or not YU has more subscribers than Orange according CCK report of the period ending December 2012. Yu had 10.5% Market share compared to Orange 8.1 %.
So what can others learn from Safaricom:
1. Customer Care
Safaricom is not an angel on this but they are much better than the others. I have seen so many people saying that despite their misgivings about Safaricom, the other telcos are worst in comparison. I think they have done great job using twitter to help their clients. Last year I did a test, by complaining about network reach of Orange, Safaricom and Airetel and tagging them on Twitter at the same time. Same tweet, sent out three times , tagging each of them, complaining about the network reach. The tweets were scheduled and published at the same time. And Safaricom responded within 2 minutes, Orange did respond after 6 hours and Airtel never bothered. Customers have the money, if you want to make profit treat them well.
2. Not really Risk takers but maybe… risk takers
Safaricom paid $25million to get 3G license while others were sleeping. Until towards the end last year, Safaricom was the only mobile operator with 3G in Kenya. It is the reason why they overtook Orange on mobile and fixed data. The cost was high but Safaricom saw the opportunity and took it. 25million dollars is over 2 Billion Kenya shillings. It is quite a lot of money but Orange and Airtel were capable of paying the same. Fast forward in 2013 and the mobile data revenue for Safaricom is Ksh.6.31 Billion.
3. Ready to try new things and Ruthless at the same time
Talk of any successful product by Safaricom there is someone crying on the background that the idea was somehow his/hers. Mpesa, very innovative idea but there is someone who tells everyone who has ears to listen that the idea was his. MShwari, Ask Faulu Kenya what they think about it. Even the “please call me” service, I met someone who insisted that it was his idea. All that might be the case but having an idea alone does not mean a lot. Executing it is the key, a fact that Kenyan developers and techpreneurs should learn. Safaricom is not unique on this, it is said that initial Facebook code was stolen and the guy who came up with Coca cola formula gave it a way. The world is littered with such stories.
4. Money Speaks
Safaricom spend obscene amounts of money on advertising and there is justification for that through the profit they are making. Spend money to get money. They do spend it in all directions; Traditional Media by way of Newspapers, tvs and radios, Billboards, New Media/Digital Media. I think EABL is capable of matching them but selling alcohol comes with sort of restrictions. Banks like KCB or even Equity Bank also have the means of matching their marketing efforts. Whatever the case I see Safaricom remaining the most profitable company in East and Central Africa for some time.
5. Be part of the Community
Safaricom is all over, be it sports, Schools, Arts, Music. They realized that people like sports and they are now involved sports events such as Safari sevens and Lewa Marathon. There is even Safaricom tetemesha pool team led by Idd Salim. It is only in Football that I have not seen them. If only the community clubs like Gor and AFC with huge following were not politicized and their fans ware to take a chill pill maybe Safaricom would be involved in professional football too.
Safaricom has come up in a big way to support arts in Kenya. They host all sorts of arts event at Michael Joseph Center for free. For some things, you just need to clap for them.
6. Young smart highly educated workers
They are the leaders of today and they are doing wonders. Sometime you might just need to take risk, get rid of grey heads and bet on young people to deliver. With guidance they do. And oooh most grey heads these days dye their hair, so be careful