Littlecabs will be Safaricom’s version of Uber – but I doubt if it will ever succeed
Uber has been successful in very many parts of the world and is becoming quite a force in the taxi sector in Kenya. In February, the popularity of Uber amongst Nairobians forced disfranchised normal taxi drivers to gang up against Uber drivers, destroying a few Uber cabs in the process. Uber’s success in Kenya was also seen when expanded to Mombasa just within a year of entering Kenya. In East Africa Uber has by early this week started operations in Kampala – but things won’t be so rosy for Uber as East and Central Africa’s biggest company, Safaricom, has announced her intention to start a rival taxi service to be known as Littlecabs.
Safaricom in conjunction with Craft Silicon is set to launch Littlecabs in about three weeks. This was revealed by Safaricom CEO Bob Collymore in an Interview with Reuters where he said that Safaricom will help to develop the application for the service, offer the network connectivity, put Wi-Fi in vehicles that will be signed up on it, and use its mobile-phone based financial service M-Pesa to process payments. According Collymore, the Littlecabs services are expected to be more competitive both for taxi users and the drivers.
The reason Bob Collymore gave for deciding to venture into the taxi business is expansion of revenue generating streams where in the future Safaricom intends to become a platform for plethora of services. Already Safaricom has ventured into financial services through its MPESA product in which banks can offer lines of credit to the millions of Safaricom subscribers. Another successful story is the partnership with M-KOPA where rural folks in Kenya can obtain solar powered lighting solutions alongside being able to easily purchase TV sets through the M-KOPA loans.
Although Uber has enjoyed a near monopoly in the Kenyan market, the taxi operator has already faced competition from other players like Easy Taxi and a few others. These other players are however not enjoying the popularity Uber has for several reasons, one being the multibillion investment Uber has put on its platform to shield it from competitors in all countries it has ventured into.
Due to the multibillion investments, Uber has been able to standout against competition in almost all those with exception of a few like China where the Uber variant Didi Kuaidi has managed to send Uber into loss make spree to the tune of billions of dollars per year. It is therefore very unlikely that Safaricom may be able to beat Uber on its own game here in Kenya where the others haven’t been so successful, but the story of Didi Kuaidi in China gives a glimpse of hope to Safaricom.
The glimpse of hope Safaricom may have to succeed in the taxi business is however just that, a glimpse. This is because not only will Safaricom convince Kenyans that Littlecabs has better services than Uber (e.g. by capitalizing on the free Wi-Fi to be made available in all Littlecabs taxis), but they also need to get drivers to sign to Littlecabs in large numbers and as fast as possible. Today the number of drivers who have signed to Uber are so many that almost every part of Nairobi has at least two Uber drivers on standby at any given moment. For Safaricom to be able to enroll an equal number of Littlecabs drivers, they’ll need to promise the willing drivers good returns for their services, but they won’t be able to do so without minding the cost they must pass down to consumers.
Safaricom could not have minded overcharging the consumers for the Littlecabs services just as they over charge them on MPESA, M-KOPA and voice services, but this time round they are entering a business where both the consumers and the operators (taxi drivers) have already fallen in love with the dominant player, so exorbitant charges on Littlecabs in order to promise drivers better pay will not work. Also, unlike Uber and Naspers that are known to pour billions of dollars to new products like Uber and OLX respectively until the products become accepted by almost everyone, Safaricom is known for pulling the plug on products that don’t generate profits after a few months in the market. Vumaonline, Safaricom Unlimited Internet, and the infamous Safaricom Postpaid tariff are a few examples of services that have been discontinued due to profitability reasons.
The question I have right now therefore is how Littlecabs will be able to compete Uber outside the free Wi-Fi promise, the with which riders will pay via MPESA and pricing. Just yesterday I was privileged to be the first real customer for a new Uber driver that, despite using the Uber platform for the first time, was extremely optimistic about Uber to the point of saying that even if Safaricom has the dream of creating its own version of taxi services, Uber still rules.