Two days ago The Standard published an article titled Safaricom in rare panic mode as bluechip firms go after telecoms’ billions. Although the article pointed out players such as the MNVO operators including the intention of KQ to go after Safaricom’s high end customers, the most part concentrated on Viettel’s intention to take over Orange Telkom. The reasons Safaricom is being seen as panicking over Viettel are two fold: 1. Viettel comes from Vietnam, a country that is almost as poor as Kenya and 2 Viettel has had a remarkable success in shaking up Mozambique’s telecommunication industry.
Viettel, a telecom company from Vietnam
Even though Viettel was launched in 2004 as the fourth mobile phone service provider in Vietnam, it is currently the largest mobile network operator with over 40% of the market share, overtaking the earlier established MNOs including Vinaphone and MobiFone. The success of Viettel could be attributed to the fact that it is a state owned corporation that also offers low cost services at very small profit margins.
Given that Viettel comes from a developing country similar to most African countries has been pointed out by Macharia Kamau and Wanjala Were of The Standard, as advantageous in that the management of Viettel is already familiar with market needs of countries such as Kenya – a familiarity that telecos such as Orange from France and Bharti from India possibly lack. The two gentlemen argue further that even Safaricom could lack the market familiarity since its CEOs, who are seconded by Vodafone, have come from the developed markets.
Even though Safaricom could be considered as a company not as familiar with developing world’s markets as Viettel is, credit must be given to Safaricom for having been able to grow from the underdog position in 1999 to be the East and Central Africa’s most profitable company. The familiarity Safaricom has had in the market can be seen in the introduction of voucher cards (credit cards) for airtime purchase and per second billing both of which were first shunned by the then mobile phone market leader, Kencell.
Viettel’s entry and success in Mozambique
Viettel was licensed in Mozambique to operate as Movitel in January 2011 but rolled out more than a year later on May 2012 after building equal number of mobile stations that existed then (thereby doubling the coverage level) and a fibre network system that covered more than 12,000 kilometers. Currently the base stations have expanded to 2,800 from 1,800 in 2012 and fibre has covered over 25,000 kilometers.
In additional to mobile and Internet infrastructure deployment, Viettel is committed to providing free Internet to about 4,200 schools. It has also adopted a door-door sales service that contributed greatly in its market growth. By 2014, Movitel had acquired more than 32% market share of Mozambique’s mobile phone subscriptions.
Advantages that Viettel have from experience in Mozambique are robust and rapid infrastructure deployment, low cost of service provision, free Internet provision in selected institutions, and door-door sales strategy.
Why Safaricom should panic
Safaricom is said to be going to the boardroom to strategize on how to beat off competition, and one strategy they might adopt is to strengthen the products they already have competitive advantage on – and the sole product that make Safaricom customers glued to the network is M-PESA.
M-PESA is however facing troubles as the agents that Safaricom had refused to share with the competitors are already open to offer mobile money services from rival firms. The introduction of virtual licenses in the country that has enabled Equity Bank to threatened Safaricom’s dominance in mobile money market is also a factor that Safaricom must pay serious attention to.
The second strength Safaricom has is the availability of money it can use to seriously compete with any mobile giant that may lay foot in the country. When Orange started a price war against Safaricom back in January, Kachwanya wrote an opinion piece titled Orange Vs Safaricom:- Let the War Begin in which he argued that Safaricom has the money, customer care advantage, penetration, and good management practices to help it win the war against Orange. Personally I wished for Orange to win the war and wrote a piece titled Orange Vs Safaricom: Orange should win the war against Safaricom.
If the latest statistics by CA is to be believed, then Orange is already winning the war. According to third quarter report for the financial year 2013/2014, “Telkom Kenya had the highest gain in subscriptions of 8.8 per cent”. Safaricom on the other hand gained only 1.5% being beaten by Airtel too which had a gain of 1.8%. By market share, “Telkom Kenya (Orange) recorded an increase in shares of 0.5 percentage points to stand at 7.7 per cent up from 7.2 per cent shares recorded during the previous quarter. Safaricom Limited and Essar Telecom limited lost 0.1 per cent and 0.5 per cent of market shares to reach 67.8 per cent and 8.0 per cent shares respectively. Airtel Networks Limited shares remained unchanged at 16.5 per cent.” As much as people talked less during the last quarter, people talked more on Orange at 234 million minutes up from 208 million minutes the previous quarter. Safaricom on the other hand lost 100 million minutes where people talked for 6 billion minutes in the third quarter down from 6.1 billion minutes the previous quarter.
Lastly on Internet services, CA reported that “Safaricom Limited lost 1.5 percentage shares to record 72.1 per cent shares down from 73.6 per cent registered during the previous quarter. In the same way, Airtel Networks lost 1.2 percentage points to record 13.7 per cent from 14.9 per cent shares during the last quarter. There was however gain in shares by Telkom Kenya (Orange) of 3.4 percentage to record 10.3 per cent up from 6.9 per cent shares during the last quarter”.
The above statistics indicate that the “Did you know” campaign by Orange bore fruits even before Orange takes advantage of the weakening strengths of Safaricom on the opened M-PESA agents. If Viettel takes over Orange, then the rapid infrastructure services, freebie community services like free Internet to schools and door to door sales strategy can mean significant gain for Telkcom Kenya (Orange).
Viettel cannot be too happy
It is likely that Viettel may win the bid to buy Orange once the French teleco pulls out of telecom. Viettel, after registering remarkable success in Asia and now Mozambique, might venture into the Kenyan market with huge investments in marketing, infrastructural deployment and low cost services with an assumption that the Kenyan mobile market is like any other market of the developing world.
What Viettel must realize is that some of the strategies it has used to woo subscribers in Vietnam and Mozambique have been tried by operators like yu of Essar Mobile that came into the country with gusto – to a point where yu was giving out its SIM cards for free, providing 20 shillings access airtime, and at the same time allowing customers to make free yu-yu calls in addition to offering free SMS services. Yu mobile hoped that these freebies would woo tens of millions of Kenyans into its network to thereafter start charging reasonable fees for its products and services.
But after trying the market for about five years, Yu mobile has not been in a position to either register any significant market penetration or even make any profits. Actually, yu has gone under to the point where it is willing to sell its 2.64 million subscribers to Bharti Airtel and the mobile stations to Safaricom.
However, the recent awareness campaign by Orange on the per minute charges on Safaricom compared to charges on Orange that is registering success on Orange’s revenues and market share would bring hope to Viettel’s door to door sales campaign strategy.
Reading through articles on Veittel’s products and services, one key strength the teleco has is the ability to provide high quality data both via mobile network (3G) and via fibre. Actually, having laid over 25,000 kilometers of fibre in Mozambique, Viettel has managed to make Mozambique the third country in Africa on fibre Internet connectivity.
Safaricom’s Internet, despite being expensive, especially after dropping the monthly unlimited access, does not have reliable Internet in most parts of the country. Even in areas where Internet access seem to be reliable, there are always two to three hours of downtime each day.
If Viettel enters the market to provide high quality data and low cost offerings, many tech savvy Kenyans will ditch Safaricom for Viettel and help in promoting the teleco as the most reliable in terms of data.
Door to door sales campaign by Viettel
The door to door sales campaign has been tried by both yu and Orange. Currently, Pillar Technologies, an airtime distributor with Orange Telkom is utilizing the door to door strategy but instead of following the traditional sales route, it has opted to adopt the multi-level marketing approach dubbed DIPEK or Direct Intervention Programme to Empower Kenyans that we had highlighted before. The level of growth on Orange’s revenue, especially given that the same growth started to happen only in the last quarter, indicates that DIPEK is not bearing fruit as claimed by participants of DIPEK.
But a traditional door to door sales approach especially a “civic education” oriented one that focuses on highlighting the advantages a mobile service provider has over competition is likely to bear fruit, faster. I am thinking more of the sales strategy employed by some religious organization e.g. Jehovah Witnesses for proselytizing believers and non-believers alike. A number of insurance companies also employ professional based door to door sales approach.
If well organized and professionally conducted, then it is highly likely that once Viettel enters Kenya, Telkom Kenya might climb, within a year or two, to become the second largest mobile network operator in the country.