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Safaricom Dominance : Why Other Telcos Need To Innovate To Survive

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On the story asking why Wangusi was sent home, I mentioned that Safaricom dominance issue could not be the reason. Since then I have spent a lot of time thinking about the issue of Safaricom dominance in Kenya. For those who have no idea according to Dictionary of Marketing Terms, a dominant company is one which accounts for a significant share of the given market and has a significantly larger market share than its next largest rival. They may hold onto their dominance through various strategies, including innovation, brand extension, and price wars, that trailing firms do not have the resources to match. When you look at the first part of the given definition then you would see why Safaricom could be considered a dominant company in Kenya but the big question is whether this is an issue and how did we got there.

To be honest debate about Safaricom dominance is essentially questioning why Safaricom is successful and others specifically Airtel are not. Before I go far on this, it is important to note that it bothers me that in this case we are sort of questioning success instead of celebrating it. And I hate to see any one or any company punished for being innovative. You see from the above, a company achieves dominance through innovation, brand extension and price wars. When you look at Safaricom, they won the battle majorly due to innovation, and in my mind that is what we want for this country.

Innovation

What many people might not be aware of is that in the beginning, Safaricom was the underdog compared to Airtel, which then was called Kencell. Kencell launched its mobile services six months ahead of Safaricom back in the year 2000. Their focus then was the high end of the market and it became the network of choice of the Kenyan elites. Due to that, Kencell was richer and was able to successfully wage price war against Safaricom when they realized that the new kid on the block was becoming a threat. Safaricom took a different approach……. innovation, something that has described them up to date. When Kencell launched, they used to bill subscribers per minute of talk time. So their charges were like Ksh35 per minute and it did not matter whether you talked for one second or a full one minute. For those who like flashing or buzzing people so that you get to be called back, doing it then was very risky. And the reason was if you did not time your flashing duration well and the person at the end of the call picked it then you would be charged for the full amount, and in this case Ksh35. Safaricom decided not go head to head in terms of competing on call prices but instead came up with per second billing. That was a game changer in many ways. One, it meant people were being charged for what they have used instead of being forced to talk for a whole minute in order to get the value for their money. It also made it a little bit affordable for the price sensitive Kenyans. And that is how Safaricom became the network for the ordinary Kenyans leaving Kencell for the Masonkos.

What about Telkom Kenya, some may ask? The only thing that need to be said about Telkom Kenya is that Safaricom was initially a department of Telkom Kenya. When you give birth to a child and  later she/he becomes a giant, probably you just need to be happy instead of complaining that the kid is dominant bla  bla  bla. On a serious not Telkom Kenya had unmatched inbuilt infrastructure and I came to understand that back in 2008 when Orange was taking over Telkom Kenya, Safaricom feared that they would run away with data segment. Just like Airtel, Telkom Kenya and later Orange and back to Telkom Kenya, squandered their advantage.

For Safaricom the culture of innovation did not stop there, in 2007 they launched MPESA, which changed the competition landscape like forever. Again it was innovation propelling Safaricom to greater heights leaving their rivals whining and complaining.  Worldwide, there are companies that dominate their given market, but I have not heard the calls for them to be broken up like I hear in Kenya. For years, Bill Gates’ Microsoft have dominated the Windows Personal computers (PC) market. Back in 2000 when Microsoft was a global force, Microsoft Operating system Windows had a global market share of 97%. They were truly dominant both in US and in the world stage.  Instead of the rivals calling for them to be tamed, they went the innovation route. As I write this, Microsoft OS market share is now in the range of between 20 to 25%. It is important to mention that how computers were classified then is different from what it is now. In 2000, phones were never considered personal computers and tablets, IoT devices were not a thing then.  Another example is Google Search Engine. If you want to look for something online, the term you use is Google it. And it is a fact most people do not know that there are other search engines like Bing, Yahoo, Ask, Wolframalpha, including our very own Irozho.com which was developed by 3 KCA University students. Guess what, they are not holding press conferences and forming task force on how to deal with Google. They are simply encouraging others to innovate and get a way to compete.

Personally, I think Airtel and others have not been able to gain the ground in the Kenyan market due to in large extent their incompetent and lack of imagination.  We all thought number portability was the game changing moment the industry had waited for, for years. When it came many people got excited and moved to Airtel. Normally, when people move to a new service they expect better, they expect efficiency especially when it comes to solving customer issues. That was not the case and those who moved did not tell a great tale about their new home. Some decided to come back and others who were intending but had not moved decided to remain with the devil they knew. I do understand those who say people stick with Safaricom due to Mpesa but those who understand Kenyans know the role the great customer service play in influencing the choices people make.

Talking of MPESA, it is not like the others did not have the mobile money services. I think the “people stick with Safaricom due MPESA” phrase is a simplistic way to look at this issue. To start with, Airtel money has been around as long as I can remember, and there was Orange money as well as Yucash. I know the next argument on this has always been that Safaricom have agents all over the country and hence people prefer what is available next to them. That is true but Safaricom invested their resources to build the agency network. If you want to rival them then you simply need to do the same, invest and create your own network. Still, at some point Safaricom was forced to share their agents with Airtel. Many thought this would sort out the issue of MPESA being the mobile money of choice. Well, most of the agents now have Airtel Money and Safaricom Money side by side but the preference still remains.

Courtersy of Techsahara.com

 

At the beginning, I mentioned, the means that firms use to get ahead and so far it is obvious that Safaricom has maintained their position through innovation. I would have had a different view if Safariom was using the other means like price wars to maintain their lead in the market. But the history of telcos and the price wars shows that others have been the ones using it on Safaricom. Back in 2012, Business Daily even thought that the price wars waged by Airtel then was a threat to the long term survival of the Kenyan mobile phone industry. Below is the part summary of the 2012 Business daily article describing what they called a bloody and gruelling price war;

“On August 18, 2010 the Indian firm shocked the local telecoms industry by cutting its calling rates by 75 per cent, in what has turned into a two-year bloody and gruelling price war that has reverberated across the country.

Safaricom and Telkom Kenya were also forced to cut their prices. For instance, Safaricom cut its call rate from Sh8 per minute on its network to Sh3 to match Airtel, and from Sh12 off network to Sh4.”

All in all, before that and even up to now, if you ask any Kenyan about the telcos prices and they would tell you that Safaricom services are more expensive than the services of their rivals.

Based on that, at some point we have to look at Airtel and others and acknowledge the truth. The problem is with them, not Safaricom or even regulators which have done all they can to allow them to compete. Airtel specifically for years refused to give the local unit the autonomy needed to succeed in this market. There is no way you are going to compete in the Kenyan market while the decision about Kenya is being made in India or Somewhere in Africa. And there is no way you are going to succeed in the Kenyan market if the local lads are not given the freedom to think and innovate freely.

 

What is your opinion on the topic?
Kennedy Kachwanya
Lead Blogger at Kachwanya.com
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Kennedy Kachwanya is a technology blogger interested in mobile phones both smart and dumb, mobile apps, mobile money, social media, startups ecosystem and digital Savannah. New media must not forget the strength of old tech.
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MOBILE MONEY · TELECOMMUNICATION