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8 May 2016

Industry and Competitor Analysis

KENYAN MOBILE INDUSTRY
Individual Assignment
MBA Weekday Part-Time

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Kenya’s Telkom
monopoly was brought to an abrupt end
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This was followed by the entry of Safaricom, Bharti
Airtel and Essar’s “Yu”
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The other Network Operators comprise the remaining share of
the market
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In 2002, Safaricom proceeded to position itself as a “cheap” network
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Safaricom then went on to localise its branding and marketing
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In 2009, its profit earning
were 20
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This was quite an achievement – the highest amount ever earned by a Kenyan
company
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In terms of its lifecycle, the voice segment of its product range
is plateauing
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Analysts propose that networks focus on data revenue, value added services,
product differentiation and service quality
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Safaricom
Formed in 1997, Safaricom is Kenya’s leading mobile network operator
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Subsequently Vodafone of the
United Kingdom acquired a 40% stake and management responsibility for the
company
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The other players, namely Airtel, Orange and Yu are still incurring losses
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Innovation is the creation of
something new that makes money; it finds a pathway to the consumer”
Bernhardt (2008)
“Management innovation must be regarded as much an art as a science”
Bernhardt (2008)

M-Pesa (M is for mobile and Pesa is the Swahili word for money) was created as a service
which would allow microfinance borrowers to repay and receive loans utilising Safaricom’s
network of airtime resellers
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M-Pesa became a “branchless”
banking system – allowing users to complete banking transactions, without the need to
physically visit a bank
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The service was first
launched in Kenya in March 2007
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5 million
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M-Pesa’s success lies in its innovation!
It offers a secure and simple money transfer solution via mobile phone
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No bank account is needed which
eliminates a large degree of complexity and difficulty for the mass market
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M-Pesa generates revenue
by charging commissions on transactions
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Daily person-to-person transfers have reached $16 million in the first half of 2010

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“We are beginning to see the era of consolidation
in African telecoms markets as declining tariffs put pressure on revenue” Pater (2011)

The industry is under threat by a fresh price war
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Collymore stated that Safaricom would not be following Airtel’s most recent tariff cuts
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We are unlikely to move to that level because I have
been charged with looking after the responsibilities of not just customers, but also
shareholders
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He purports that Airtel is only seeking to attain critical mass in a rather rudimentary way
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Collymore suggests that Safaricom could pursue predatory pricing, however they
have decided against this as it would be irresponsible
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The regulator the CCK (Communications Commission of
Kenya) has reduced call tariffs in Kenya to the lowest level in Africa
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5KSH per minute,
as opposed to the East African average of 11KSH per minute
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CCK introduced lower mobile termination rates in August 2010
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The
termination rates are set to fall to 1
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15KSH in July
2012
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Growth in subscriber numbers is predicted to slow down
gradually in following years
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However these profits have been eroded
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9 Forces Analysis
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Economic Shift – Kenya is an emerging market and is subject to emerging market
risks and volatility
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Customer Bargaining – As there are 4 Mobile Network Operators, and very low
switching costs, the Customer has relatively high bargaining power
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Social- The Mobile penetration rate in Kenya is very high at 63%
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However

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this cannot be ruled out
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Such
an example of such enticing offers includes Yu network’s free intra-network calls,
between 6am – 6pm, weekdays
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Safaricom’s Strategy
The conditions mentioned previously, namely: very low call rates and plateauing
voice revenue has impacted Safaricom’s strategy
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Data is a key resource pivotal to the
Mobile Network Operator’s future success
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The overall data
strategy includes making affordable data enabled devices available to consumers
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M-Pesa is the global leader in its reach and
acceptability as cash
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8 million Customers
and 27,000 agents throughout Kenya
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M-Pesa has also extends its capabilities to
allow users to buy goods using M-Pesa from various retailers and launch a credit
card application
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Figure 1: Kenyan Mobile Network Market Share by Subscriber Base
Source: CCK, operator’s compliance return forms

Q2 10/11 Figures:

Service Provider
Safaricom
Airtel
Orange
Yu
TOTAL

Subscriber Base
17 451 325
3 792 404
2 133 462
1 591 700
24 968 891

Source: CCK, operator’s compliance return forms
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Figure 2: Exchange Rate Conversion 1 USD = 101 KSH
Source: http://themoneyconverter
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aspx

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Figure 3: Product Lifecycle – Voice calls in the plateau (Maturity to Decline) phase
Source: Tuner Blane

Figure 3: Growth in Kenyan Mobile Subscribers

Source: CCK, operator’s compliance return forms

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Figure 4: 9 Forces Model

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The Wits Business
School Journal, July – September 88 – 92

Bernhardt, DC (2002) Strategic Intelligence: ‘the Sword and the Shield” of the enterprise
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com/last-business-news/ last accessed 09/10/2011

Nyabiage, (2011) Game of Numbers available at:
http://www
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co
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php?id=2000042695&cid=457 last
accessed 09/10/2011

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