Category Archives: kenya communications

Urgent need for Sub Cable

Whether it will be EASSy or TEAMS, the urgent need for East Africa to have a submarine cable will become apparent within a few years.

The 2006 merger of Intelsat and PanAmSat, creating the worlds’ largest satellite provider, will have profound implications for Africa which is estimated to be 80% dependent on satellite communications. Higher costs can be expected from the giant company once existing agreements expire and ISP’s will have no choice but to pass these own to consumers.

The government of Kenya broke away from other African countries (in EASSy) and has committed to the TEAMS project, budgeted at $100 million. It committed to pay $15 million this financial year and has contracted Standard Chartered bank to raise additional funding from ICT operators in the private sector.

Access Kenya IPO

IPO season is on again and this time its Access Kenya – a leading corporate ISP and telephony company.

Am yet to see the full prospectus, which should be an interesting read to see the trend of share capital and profit adjustment that is alluded to in the abbreviated prospectus published in the paper on Thursday – the day the IPO started.

The company has learnt from the Eveready listing and set out to limit shareholder numbers by setting a minimum investment for retail investors at a moderately high 50,000 shillings ($715).

Industry: The communications sector has so much happening now from – unified licences, the Wananchi ATC deal , Telkom SA/AfOL deal, Telkom Kenya re-engineering itself, EASSY vs. TEAMS cabling, fibre optics everywhere and of course Safaricom at the top of the food chain who have continually reinvested much of their record profits towards infrastructure expansion.

Investments in the sector are not cheap and with technology rapidly evolving, the 400 million shillings that will accrue to the company may not be enough for more than a few years at a company that starts off with a marginal balance sheet.

IPO results will be out in May and shares will be listed in June 2007.

Other opportunities

from the daily papers this week

Jobs

Coca Cola – East & Central Africa business unit: franchise marketing manager, hospitality manager, operations marketing representative, financial services manager financial accountant senior brand manage (2) revenue growth manager commercialization manage (2) strategy development manager, human recourse manager compensation & benefits manager quality improvement manager

Apprenticeships for mechanics at DT Dobie: applicants must be under 22 with good grades in maths, physics, English and apply in handwriting by 11/5 to DT Dobie Training Center p o box 30160-00200

Safaricom: head of customer management, head of retail. Apply to chro@safaricom.co.ke.

Soon you can dine in the skies as the Kenyatta International Conference Center has set out to revive its roof top revolving restaurant on the 27th & 28th floors of the building.

Ecofade II

Part I

Econet Wireless fired off another long letter to the Minister for Information and Communications this week in addition to printing it (2 pages long, badly worded, with typos) in the Nation to explain why they have not rolled out almost two years since they were awarded the third mobile license.

The company which has a history of big talk blames red tape and invisible forces who have continued to manipulate the license process.

Econet’s MD writes that they want (then) Minister Raphael Tuju to retract his unauthorised statement cancelling Econet’s license and also wants the CCK to issue them with network codes. They claim CCK and various officers have been pushing them to renegotiate with KNFC (an entity who could not pay for 5% of their purported 82% ownership), and also lend money to KNFC to enable them to pay for their $12m portion of the license fee.

Econet claims to have already spent $40m on the process (also what happened to applied for jobs at Econet?

Air news

– Early Bird offer from Kenya Airways has round-trip flights to Mombasa at 5,000/= if you take the 6:45 a.m. flights.

– Kisumu Airport should reopen next week when repairs should be done.

– Qatar Air Cargo to serve Nairobi and Eldoret from next year.

December 9 Opportunities

Jobs

Corporate affairs group leaders (2) at Celtel. apply to hr@ke.celtel.com by 15/12

Internal audit manager at East African Portland cement. D/L is 22/12

East African tea trade association
– finance/investment analyst
– project management office director
Apply by 22/12 to eatta.tea@gmail.com

Power economist at the Electricity regulatory board. D/L is 29/12

Multi-lingual flight attendants at Kenya Airways – (both male and female) – fluent in Hindi, Arabic, Spanish, Italian, German, French and Portuguese aged 21 – 30 (in addition to the other similar flight crew requirements). D/L is 20/12 for applications to the group human resource director.

Director treasury at Kenya commercial bank. Apply through Hawkins associates

Oracle
– education sales consultant
– middleware pre-sales consultant
More details their site and apply to mearecruit_ae@oracle.com by 15/12

Retail, sales & marketing – area business managers (2) at Shell. Apply to hr@ksl.shell.com by 11/12

Urgent cargo
– chief operating officer
– general manager – freight
Apply to hr@urgentcargo.com by 18/12

Internships

Aga Khan Foundation young development professional (YDP) program a 1 year leadership and management development program – accepting two streams this year (i) development management (ii) arts, media, or culture management web link here and deadline to akf.kenya@akdn.org is 20/12

Kenya Oil Company (Kenol) management trainees preferably who are fluent in Portuguese or Spanish. apply by 18/12 to the human resource manager.

Telkom Wireless

Previously

Telkom has finally launched wireless services using RUIM cards that are inserted into handheld or desk phones. The basic wireless phone is a Huawei model that retails for about 9,000 shillings while a line (RUIM card) costs another 1,000.

The service is available in Nairobi only for now – roughly covering the area between Mlolongo to Ruaraka, to Banana Hill to Kikuyu and Langata.

Local calls are billed at 7 shillings per minute, calls to mobile at 24/= per minute (billed every 10 seconds), calls to Flashcom/Popote will be at 14/= and international VIOP 888 will be at 15/= per minute.

Data can be obtained (via dialup) at 3 shillings per minute.

You can use Telkom phone cards (denominations of 200, 500 and 1,000) to top up.

But it appears SMS is only possible with other Telkom wireless phones and billed at 2.50 each. Maybe Safaricom & Celtel have not allowed outsiders’ access to their subscribers.

Verdict: A humble start without much fanfare. Expect some teething pains and the savings and possibilities will take a few months to become apparent. As Shiroh noted, peer pressure and word of mouth are key drivers for people to try new services.

Other Observations

Banking
– Did Kenya and other country banks violate laws by sharing bank data with US authorities on SWIFT transactions?
(From Dealbreaker)
– An Islamic bank will open branches in Nairobi and Mombasa by year end running full Sharia principled banking.
– Postbank is implementing a new business model for next year

Other
– The first public Kengen AGM will be held at Kasarani gymnasium in November. I’d have held it at Masinga or Turkwell dams or Olkaria.
– Is Safaricom using VoIP for its help line? When/If you ever get through the call quality is very poor
– Saw a CCK monitoring vehicle driving round the city this week. Perhaps trying to trace some illegal signals?

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.

Today

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.

Marketing
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.

Competition

  • 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.

Financing

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.)

Other

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.

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.