Category Archives: Safaricom success

The Trouble with Celtel

Are free calls enough?

[I am not a customer, but I have probably bought and discarded three of their SIM cards to coincide with some ongoing promotions. Too many people I call are on Safaricom, and until number portability comes along, (carrying my number to another network) I am stuck with Safaricom.]

Beside number portability, there are other things they need to sort out; Celtel has been losing customers (23% down from a year ago), executive staff (compared to the ‘stable’ team at Safaricom and direction. The change of brand from Kencel to celtel to Zain only benefits paint and marketing companies (but there’s already a ‘Z’ brand in Tanzania and a couple of other African countries)

My biggest peeve with them is there are too many products; these are never promoted long enough to mature or register with subscribers and potential customers.

This week
– For internet/data users – they have Uhurunet – unlimited internet service, whose equipment is a USB modem costing 6,000 shillings [$95] and 3,000 [$48] per month for unlimited internet which is not bad [and this compares well against Safaricom]

– For callers: Earlier this week they launched a six-month tariff with free airtime for people who purchase cheap phones (targeted at rural subscribers). And now from the skunkworks group we learn that they have another new tariff with Free calls from 6 a.m. to 6 p.m. every day (top up with 100 shillings to take advantage) – will this be the one that gives them an edge over Safaricom? That’s the problem with Celtel – great products, big marketing budget, but jumbled messages that confuse subscribers. In the last year they have advertised their lowest rate at 6 shillings (Mambo 6), 4 shillings (to 3 preferred numbers) and now 3/= ($0.05)per minute. That is three times cheaper than Safaricom, but who has the masses and who has the right message?

Other tales

Opportunity: Nominate a worthy Kenyan to the Generation Kenya program

– From Uganda and GTV comes pre-paid premium TV – subscribers can pay for their GTV pay TV packages using scratch cards

Experian Kenya: joining the Kenyan credit reference pool is Experian in partnership with Quest Holdings.

Day 19 of the Safaricom IPO has 4,121 deals, worth 342 million ($5.42 million) Closing 7.20 High 7.40 Low 7.00 Last 7.20 and volume of 47.5 million shares. It’s well supported and Buyers must be sniffing out a conclusion to the de-leveraging process. Commentary and data from – NSE data vendor [with Free real time prices between 0930 -1500]

Mostly Safaricom II

Safaricom, the largest, (acknowledged) most profitable company in Kenya has returned a profit of Kshs 17 billion ($250 million) for the year ended in March 2007 – 40% better than the year before. What are the seven deadly sins again? I just want a decenet election year IPO.

Safaricom Success

Mr. Michael Joseph, the Safaricom CEO, gave a talk over the weekend on leadership and the successful transformation of the company from a moribund department of a dying parastatal (Telkom Kenya) to arguably Kenya’s most successful company. The Q&A session also brought out more candid answers particularly on challenges he, and the company, faced as well as the performance of its competitors. And since Safaricom is not (yet) a public company, this is perhaps the closest thing to an AGM of shareholders for the company until 2009.

Safaricom CEO, Michael Joseph
The Beginning

The Company started in 2000. Vodafone (40%) put in $20 million while Telkom (Government of Kenya) who were supposed to chip in with $30 million, didn’t put down any cash, giving only their dilapidated network infrastructure and 17,000 existing, and angry, customers. The company had 5 employees led by the CEO who had done a similar start-up in Hungary. However, three days after the company launched, its network collapsed, damaging its reputation for network quality.


Safaricom’s revenue is comparable to East African Breweries and Kenya Airways. It is several times larger than its competitor, has 900 employees, and 4.6 million subscribers (the company also envisions Kenya as having 16 million potential subscribers). It has invested 55 billion shillings, all internally generated, constructing its network, which now covers about 20% of the geography of the country.

Success factors

Safaricom made several key decisions early on, but was helped by the collapse of Telkom landlines and, in hindsight, some blunders by Kencell (now Celtel) which launched around the same time and which initially had a larger subscriber base in the early years. These include:

  • Focus on prepaid customers The company felt that in a country without a strong credit background industry, consumers would only spend what they had. Also, the CEO felt that they would need these mass-market subscribers to support corporate customers who were more lucrative. Today they have 90% of the corporate market, which Kencell set out to target initially.
  • Billing per second for calls while Kencell billed per minute. Safaricom sacrificed about 20% to 40% revenue per call but again, it won more customers who preferred to only pay exactly for airtime they used. There was much debate about which method was superior, but ultimately Safaricom won out.
  • Having great customer service which was free and available 24 hours a day. While customer service is only paid lip service in Kenya he felt this would be important as consumers ventured into the new mobile phone industry. Meanwhile, Kencell’s customer service was available only during working hours and was not free. The CEO knows it is difficult to get through to customer service but that’s because the company gets an average of 25,000 calls a day, sometimes double. Yet 95% of these calls are simple, “how-to” questions (e.g. send SMS, change tariff) everyday questions, answers to which are found in phone brochures.

Even though the company is 40% UK-owned, all their products and advertisements cultivate a Kenyan image utilizing the beauty of the Kenyan landscape and Swahili words (sambaza, bamba etc.) to reinforce how ‘Kenyan’ the company is.

CEO was very dismissive of Celtel (a pan- African company) whose advertisements have nothing Kenyan about them and faults their marketing strategy for assuming all Africans are homogeneous. Earlier, Kencell also introduced (French) Sagem phones to Kenya, which no one had heard of while Safaricom used Motorola and Siemens as their basic phone models.


  • Safaricom’s average revenue per user (ARPU) is 2 X Celtel’s and has not dropped in three years even as subscribers have more than doubled, leading the CEO to conclude that most Celtel customers are primarily Safaricom customers. Even though the company has network difficulty in some places e.g. Industrial Area, Safaricom has never shaken the impression, wrong he feels, that Celtel has a better network or clearer calls. He also says Celtel has a very high-cost structure since they have ½ the revenue but only 1/10 of operating profit before finance charges.
  • The CEO is not worried about competition from CDMA wireless as long as it is in the hands of Telkom Kenya which is still a bloated giant (17,000 employees servicing 240,000 customers)
  • He is also not worried about a third entrant or other mobile operators, or new service providers, but accepts that they will change the industry.


The first time the company took on a loan, conditions were very stringent and the loan could have been recalled e.g. if cash flow dipped. But the second time they went borrowing (12 billion for network expansion) the company was so established, they were able to dictate terms to the banks. They borrowed at 1% above the T-bill rate while also retiring old debt. He also said Kencell (Celtel) had much higher finance charges since they had borrowed and were still paying back an expensive foreign currency loan from their then-parent company (Vivendi.)


Peculiar Kenyan call habits: CEO denies he ever made this infamous statement attributed to him. However, he admitted he doesn’t understand why phone traffic between 8:00 p.m. & 8:40 p.m. on weeknights is four times higher than normal, even though cheaper call rates are also available on weekends and at other times during the day.

Gift of gab: The most profitable call sites in Kenya are Garissa and Mandera. Safaricom has also set up call sites to meet high demand at remote refugee outposts such as Kakuma and Dadaab. Kenyans are also high users of text messages (next to the Philippines) while Nairobi has the highest density of mobile calls in the daytime (higher than New York) partly because landlines are poor.

Social responsibility: The company spends 200 million shillings a year on corporate social responsibility (CSR) projects through its foundation and its biggest sponsorship will be the 2007 Mombasa cross country ($250,000).

Recruitment: Safaricom only employs graduates, yet somehow 70% of them fail a pre-employment test the company administers. They are now recruiting overseas and the average age of employees is 24 (seems young).

Premium rate services: CEO hates these companies who run promotions that charge 20 and 50 shillings above normal Safaricom rates. He has to let some of them use his network, by law, but makes it as expensive as possible for them to do so.

Bad stats: When the company launched, it found that most of the government statistics on income, expenditure, and population were, and still are, wrong as shown by the number of subscribers the company has.

Honesty and integrity are the best virtues he has learned to have on his job. This has enabled him to perform his job and shielded him from unreasonable requests/offers from politicians and business people and if there had even been a whiff of anything less, he would have been asked to compromise himself or the company.

Next CEO: He’s reluctant to retire even though he knows its inevitable. His last contract was renewed, after a long battle between forces from Central and Western Kenya who each wanted their own candidate, but were unable to agree, leaving him as the compromise candidate. He will prepare for retirement by stepping back as the face and spokesman of Safaricom slowly and we will soon see other senior managers at the company take on more public roles in the future.


  • CEO wants the industry measure and focus to change from ARPU to ARPU margins
  • Call costs will come down and there will be more price competition (perhaps even 5/= per call) as new competitors and technology become factors down. He expects Safaricom profits to drop from next year and may have to start cutting costs to stay competitive.
  • Safaricom will have a new big product by year-end, which will change our lives. The company will also add a new tariff this year.

Safaricom IPO

  • IPO was planned to happen this year, but the Cabinet rejected the proposal until Telkom is first privatised. The reason is that Safaricom is Telkom’s only valuable asset, and they did not want to diminish Telkom’s IPO value and prospects. So the 25% sale will be in 2008 and will be bigger than Kengen’s, by far, according to the CEO.

Safaricom’s future?

There’s no slowing down the Nation’s Jaindi Kisero, even after he moved on to the East African. He reveals that Vodaphone has offered to buy 11% in Safaricom for $100 million to give them a majority 51%.

His commentary is naturally back in the Nation today where he points out that the offer is unlikely to receive a positive response from the Government amid complaints of how a “Kenyanisation” programme for key positions in Safaricom, which had been spelt out in an agreement at the company’s inception, has been ignored and how the company has a high expatriate dose. (is this (i) another Broken MOU, this time by Vodaphone or (ii) a move to force out top expatriates at Safaricom or (iii) a final FU to Sir Edward Clay?)