New Media Companies Redux

It’s been two years since this blog post comparing Access Kenya and Scangroup which debuted at the Nairobi Stock Exchange (NSE) at about the same time. They are both back in the news this week for diverse reasons along with a third ‘new media’ company Safaricom, which debuted later in 2008 on the NSE.

Scangroup: has just announced plans to buy stakes of 51% in Ogilvy & Mather Africa and 50% of Ogilvy East Africa. (statement here) – two companies are both subsidiaries of UK’s WPP Group who own 27% of Scangroup.

The investor at the Scangroup notes that group has recorded growing ads in TV and radio but declining in print media. In 2009, the communications sector was their largest customers with 29% followed by finance at 15%. Scangroup has 61% of the advertising market in Kenya followed by Access Leo Burnett with 13% and then Ogilvy & Mather with 10% – while their plans going forward are to do more online adverting and take the Ogilvy as their main brand across Africa

a version of this Safaricom by Squad digital, a Scangroup venture appears in the NY Times pages

Access Kenya: are in the news (details here) following their postponed by another three months of the annual general meeting that was to have taken place yesterday May 4 and payment of their divided. The company has not commented beyond a press statement.

From the blogs: On AK – a year ago, they were very very liquid while as recently as two months ago, they were hailed as a must buy stock.
from Twitter @bankelele not a shareholder, but as a concerned proxy lack of info is bad. AK should issue a profit warning or cautionary statement on restructuring
@mainaT I figure if AccessK is struggling now when internet is a growth sector, its got issues & a cash flow problem that won’t go a way 4 a while…but, Centum did the same in late 08 early 09 when it was having Cflow issues that meant it couldn’t pay a dividend
@roomthinker: Access Kenya customers, used to their speeds were not surprised to learn their AGM would be late
@coldtusker Y announce a dividend if u have CF shyte? For AK to say, ‘no div coz expanding’ is easy & plausible. Or pay only 5 cents like safcom…I think this is a bigger issue… Sold off at 22 so dont really care but I think they are in play. AK cud always delay div after AGM…I think less of cashflow issue. More of a acquisition/takeover/sale matter [#nairumours]

Finally we have Safaricom who initiated a spat with the government [statement here] after the Minister for Information (gazetted new rules for the sector including a fair competition one (draft here) and accusing the government regulator, Communications Commission of Kenya (CCK) of seeking to curtail Safaricom’s growth through price controls and to allow competitors to increase their market share.

The next day the three other mobile companies, Yu, Orange, and Zain replied in a joint statement applauding the new rules and saying they were not targeted at anyone (read Safaricom) but anyone who abuses of a dominant position in the market CCK had adopted international practices to bring real competition to the mobile sector.

This is new ground for Safaricom – when Orange raised a fuss about the uncompetitive Kenyan market, it looked like GoK would side with large taxpaying Safaricom, but now that all the small (unprofitable, they admit) new mobile entrants have teamed up, some token measures are likely to be brought to rein in Safaricom which is estimated to control at least 80% of the mobile sector by most measures. How do you bring down Safaricom from 80% to 60%?

7 thoughts on “New Media Companies Redux

  1. kainvestor

    @coldtuskers view on the Access AGM postponement is quite interesting and I get view point. However, i think regulators have left a loop-hole regarding when dividends should be paid out to shareholders and listed firms are capitalizing on it.

  2. Anonymous

    Scangroup/Ogilvy buy-out’s seemingly to help penetrate West African market which almost proved a hard nut to crack when Scanad tried buy-outs around 2007/8. Again, what else do you expect when they have such billings? Buy-outs aplenty and doesn’t stop anytime soon…

  3. startupkenya

    Usually I side with the underdogs (read Zain & Co.) but in this case I’m in Safaricom’s corner. MJ is right, CCK wants to punish success. The truth is that Safaricom got where it is through a brilliant marketing strategy which whipped the pants off the market leader at that time, Zain.

  4. PKW

    I’m so with MJ on this one. CCK should just allow number portability, which apparently is happening in July so people can move between networks. These other guys should just compete- better data, better customer service,better regional and international rates, mobile money terms in addition to their already lower tarriffs.

  5. James Murua

    The issue of Scangroup really concerns me. As the biggest player in Kenyan advertising now, they are more influential in the Kenyan media scene overall than any single individual. Bharat Thakar is one fellow you dont want to get on the wrong side of.

  6. bankelele

    Kainvestor: many companies stretch out the dividend cycle, some as long as 5 months while others pay the week after AGM

    Anon: pan Africa is the goal using WPP muscle and Ogilvy brand

    Startupkenya & PKW: you can’t force people to switch from Safaricom or can you – e.g. say no more subscribers on the pretext that their network is clogged? So you get them down to 50 to 60%. Money talks and GoK has to re-evaluate its role – where three entities have invested in privatization in the communications sector and they are losing money against a big green mountain that pays a lot of taxes to the same government. If you hurt Safaricom, there is no guarantee that the revenue gap will be filled I think as long as MJ is at Safaricom its status quo. So next year perhaps we may say fundamental shifts in mobile

    James Murua: I have to applaud Bharat Thakar for his vision as an entrepreneur. He has given up a majority of his company for a smaller stake in a bigger things. Yes he’s powerful in media, but he does not own all the creative minds in media, nor can he

  7. Kamal

    Hey on a separate note on your mention (and tweet!) – the safaricom sakata ad appears on NY Times because it is meant to!

    Contextual advertising ensures targeted ads are visible to local users as long as the site is accessed from a local IP, in your case, Kenya.

    It doesn’t matter what international site you visit – as long as you access them from Kenya, you will see local ads.

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