BY ANTONY MUTUNGA AND DAVID WANJALA
Safaricom extended its CEO’s contract that was coming to an end in August by 12 months, pouring cold water on a storm of excitement that his impending exit had began to brew. What, with speculation that GOK mulled a local head at the giant telco at the expiry of Bob Collymore’s tenure?
The apprehension in the public, majority of whom are stakeholders in Safaricom, of Jubilee Government’s salivating for a local CEO at East Africa’s biggest telecommunication company is understandable. None of the government’s high potential parastatals; Kenya Power, Kenya Pipeline, Kengen, Communication Authority of Kenya, Kenya Airports Authority just to mention a few, where local heads are running the show are measuring up to the growth pace Safaricom has set over the years not only in revenue bases but more so in innovation.
Collymore’s exit has been postponed, but it is inevitable. 12 months is such a short time and with the excitement already in the air, time will fly. What legacy does the the 61 year old Guyana-born British citizen, who has, like his predecessor, Michael Joseph, taken on Kenyan citizenship leave at Safaricom?
The birth
Before being incorporated in 1997 as a private limited liability company and as a fully owned subsidiary of Telkom Kenya, Safaricom had launched operations in 1993. The company, which started as a department of the former monopoly operator; Kenya Posts & Telecommunications Corporation, based its operations on an analog ETACS network which they later upgraded to GSM in 1996. However, the company did not get the license until 1999.
In 2000, Vodafone Group PLC, the British multinational telecommunications conglomerate, acquired a 40% stake in the company and took over its management responsibility. Two years later, the company converted into a public company with limited liability. This was the start of something spectacular. Today, Safaricom is identified as one of the biggest communication companies in East and Central Africa.
The management at the company, especially under the leadership of Michael Joseph and Robert Collymore, played a major role in growing the company to what it has become. Michael Joseph, who was first appointed when Vodafone took over the management, was able to take Safaricom to new heights. Following his dream to be a CEO, he left his work as a CTO in Hungary to come to Kenya where he started off Safaricom in an apartment with only a few other Vodafone employees.
As CEO, Michael Joseph was able to bring new ideas that saw Safaricom slowly become a favorite among Kenyans. For example, under his leadership, Safaricom introduced 24/7 free customer service, pre-paid plans, and very low-cost phones to the market. He was also in charge at the time that Safaricom introduced M-Pesa in 2007. His greatest achievement was spearheading the growth of the mobile money platform. In its first year, M-Pesa was able to have 2.07 million customers, who moved a total of Sh14.8 billion in person- to- person mobile transfers.
Change of guard
After 10 years as CEO and with M-Pesa having increased its revenue from Sh2.93 billion in the year ending March 2009 to Sh11.78 billion in the year ending March 2011, Michael Joseph stepped down and he was replaced by Robert Collymore. Prior to being appointed the new CEO, he was the governance director for Africa at Vodafone and Safaricom. After a successful campaign under its predecessor, Mr Collymore had a mountain to climb if he was to take the company even further.
Apart from this, he also had more challenges to face, for example, at the time he was joining the company, Bharti Airtel, the second largest mobile network operator in the world, was negotiating to buy Zain Africa in order to compete with Safaricom. The industry was also experiencing a different series of regulatory actions that had sparked a devastating price war that reduced mobile call rates by 75%.
Besides, many people at the time felt that the company was maturing. This was accredited to the fact that the company had posted a decline in net profits from Sh15.15b in 2009/2010 to Sh13.16 b in 2010/2011. As a result, a number of its investors sold off their shares declining the total value of the company.
Execution
Despite all these challenges, Mr Collymore came up with a plan, which he dubbed Safaricom 2.0 that focused on structural reorganization as a way of speeding up decision-making. The results of the move were positive as after one year in charge, the company was able to see its total revenue increase by 12.83% from Sh94.83b in 2010/2011 to Sh107b in 2011/2012. Revenues from voice increased by 9% to Sh68.96b while non-voice revenues increased by 4% to account for 29% of the total revenues. M-Pesa, on the other hand, was able to increase as well by 43% from Sh11.78b to Sh16.9b.
Successes
The company also introduced the LIPA NA MPESA service, which was aimed at entrenching the use of its payment services as a primary tool of transactions as well as targeting the growing SMEs in the country. However, despite the increases and new service, Safaricom once again recorded a decline in net profits to stand at Sh12.63b in 2011/2012.
Even though Collymore was unable to return to increasing net profits in his first year, he did not give up and after his second year, he was rewarded. In the 2012/2013 financial year, the company posted an increase in its year-to-year net profits to Sh17.5b. The increase was accredited to the increase in revenues from M-Pesa, data, and text. In addition, the CEO had signed a deal with Commercial Bank of Africa to provide loans and savings to M-Pesa customers through a new feature they dubbed M-Shwari. Ever since its introduction, the feature has played a major role in the growth and profitability of its mobile money platform.
Onwards, Safaricom continued to bring about new products to the market while at the same time they improved their features. For example, under Collymore’s leadership, Safaricom continued with its drive to ensure that the country was covered by data. As a result, the company became the first operator in sub-Saharan Africa to launch 4G technologies. This resulted in Safaricom once again increasing its net profits by 31% to Sh23b.
In 2015, in a move to make its M-Pesa platform better and reduce service interruptions, the company was done with foreign hosting. It moved its servers from Germany to Kenya, making the platform faster and increased the number of transactions the platform could handle. This move was later accompanied by a feature called Hakikisha that enabled M-PESA users to see the identity of the person they intend to send money to minimizing, if not eradicating the problem of sending money to the wrong person.
In a move to improve, Safaricom opened up its M-Pesa application programming interface (API) to allow local and international developers to come up with next-generation applications that will work best with it. Following this move, the company went ahead to partner up with the government to launch M-Akiba, a product that allows Kenyans to open Central Bank depository accounts and buy government paper (bonds) from their phones. The company also partnered up with PharmAccess and CarePay to introduce M-Tiba, a new health payment product that deepens the ability of citizens to access healthcare and bring inclusive healthcare within reach. These products, among others, resulted in the further growth of the M-Pesa platform.
Collymore did not only focus on mobile money. He also focused on improving data, text, and voice. As a result, Safaricom came up with products such as FLEX, which allows customers to choose how they allocate airtime for calls, SMS or data services. In order to embrace the youth, the company also introduced a tariff dubbed BLAZE that is meant to attract the youth to its services and empower them using their mobile phones. In fact, the tariff was able to attract over 1.6 million users by the close of the financial year ending March 2017.
The company had also noticed the growing demand for internet in the country. With it already holding a majority share in terms of mobile data, Safaricom decided to venture into the fixed data sector. It introduced fiber to home and fiber to business products to compete with the likes of Wananchi Companies (Kenya) limited – Zuku Fiber and Jamii Telecommunications limited – Faiba.
With home internet fast becoming popular in the country, Safaricom continues to widen its coverage with over 140,000 households connected to its fiber. As a result, the company has seen its market share in terms of fixed data rise to have the second largest portion of the market. According to the Communication Authority of Kenya (CA), the fixed data/internet market share of the Safaricom stood at 27.6% in the first quarter of 2018/2019 financial year. It increased to 29.6% in the second quarter catching up to the market leader, Wananchi Companies (Kenya) limited whose share dropped from 39.2% to 38%.
On the other hand, with their products M-Shwari and KCB M-Pesa being a solution for many to the credit crunch that hit the economy since the interest rate cap was signed into law, Safaricom introduced a new product dubbed Fuliza to offer its M-Pesa customers overdraft facilities. The product allows users who have insufficient funds in their M-Pesa wallets to pay bills, send cash, and buy goods and services.
Fuliza, which was launched early January 2019, is so popular that in its first eight days, it had attracted more than one million users and issued out more than one billion shillings. Three months later, at the close of the company’s financial year ending March 2019, the product had attracted 8.8 million users and issued out Sh45b.
Additionally, under Collymore, Safaricom also focused on non-telecommunication industries. For example, the company invested in the taxi business by partnering up with Craft Silicon to launch the on-demand taxi hailing mobile app and service, Little, to compete with Uber. It partnered up with other organizations such as PayPal, which enables Kenyan customers to seamlessly transfer money between PayPal and M-Pesa mobile wallets. This opens up global markets to Kenyan entrepreneurs.
The company was also able to finally launch a service dubbed, M-Pesa Global, that allows M-PESA registered customers to send and receive money globally.
As a result of this, Collymore helped Safaricom to reach new heights. At the end of the financial year ending March 2019, the net profit had increased to Sh63.4b.
Challenges
However, despite the growth, Collymore also experienced some failures, which to him helped the company to grow further. For instance, following the move to switch from analog to digital in 2014 and 2015, a lot of companies came up with digital set-up boxes in order to fill the vacuum after analog were switched off. Safaricom was among these companies with a product they dubbed ‘the Bigbox’ in May 2015.
Powered by android, the Big Box offered over 30 channels including local channels that were free to air. However, despite all this, the product failed to live up to its expectations. Seven months after it was launched, only 1,500 devices had been sold. This was as a result of increasing dissatisfaction by customers who had already purchased the devices. Technical glitches such as the strength of the Wi-Fi, and the cost were among the major complaints. Safaricom suspended the sale of the device three months after it was launched.
In November 2015, the Bigbox was relaunched after it was upgraded. Its price was slashed too to Sh4, 999 from its original price of Sh9, 999. Data bundles were also readjusted from packages of 50GB at Sh4, 000, 20GB at Sh2, 000, 10GB at Sh1, 500 and 6GB at Sh999 to the new packages of 5GB for Sh1, 199, 15GB at Sh3, 199 and 30GB at Sh5, 000. Still, the sales of the relaunched device were unable to reach the company’s target. The Big Box was quietly removed from the market.
The company had also come up with a solution they dubbed M-Pesa 1Tap that was to make it easier for users to use their LIPA NA M-PESA service. The service which relied on NFC technology was to reduce the process of paying using the platform from the current eight steps to two steps. The product which was first piloted in Nakuru did not do so well as it was abandoned, with many of those who had already registered for the card claiming they could not use it anywhere other than the Safaricom shop.
Additionally, Safaricom had also introduced its own e-commerce portal named Masoko, that was to compete with popular African online marketplace, Jumia. Two years since its launch, the portal has not been able to reach the heights of its competitors. The company cited problems with vendors and shipping delays as the reason for the portal not taking off.
Apart from the technical issues, the telco has also faced a number of internal problems with some of its employees being accused of electronic and sim swap fraud. According to its 2018 sustainability report, investigated cases of fraud increased by almost double from 29 in the financial year ending March 2015 to 53 cases in the financial year ending March 2018. In addition, in the same period the company dismissed 169 employees as a result of the investigated cases.
In mid-2018, the sim swap fraud had become quite popular in the country and, according to the cases reported, a majority of those arrested were employees of network operators especially from Safaricom.
For instance, in July 2018, the DCI raided Mulot town in Bomet County and arrested two suspects, a Safaricom employee and a Jomo Kenyatta University of Science and Technology student from whom they confiscated 2,160 un-used Safaricom sim cards, 44 used Safaricom sim cards, 5 agent till numbers and 3 M-Pesa record books, all of which were used for the sim card swap fraud. In the same month, two more of Safaricom employees were arrested in Eldoret as a result of the same fraud.
Safaricom also faced a number of technical problems especially on the side of its M-Pesa platform, where its system has failed to work temporarily causing major losses for many Kenyans who have come to rely on it.
According to the CA; Q2 statistics report for the financial year 2018/2019, between October and December 2018, M-Pesa handled 476.8 million commerce transactions valued at Sh1.35 trillion. Apart from causing losses to the customers, the M-Pesa outages also have a negative impact on the network operator as well. According to its 2018 sustainability report, Safaricom paid over Sh290 million for the financial year ending March 2017 in terms of fines for failing to meet a series of quality of service tests by the CA from Sh500,000 in 2014.
In conjunction with other telcos in the country coming up, Safaricom has seen its market share decrease ever since Robert Collymore took the role of CEO. The company had a market share of 78% in 2010, eight years later, the market share fell to 63.3%.
Robert Collymore, who now retires in August 2020, has been able to take Safaricom further from where his predecessor left it. Even though his time as CEO has not been easy, he has taken the network operator closer to really being titled the ‘Amazon of Africa’.
