Meet Safaricom, 'the Cosa Nostra' of Kenya's telecommunications industry

Safaricom recently made a profit of Sh15 billion in the year ending March 2009 down from about Sh20 billion recorded in 2008. The profit decline was however not too heavy to dislodge Safaricom’s regional ranking as the most profitable company in East and Central Africa. While millions of Kenyans suffer the very worst of the global economic crisis, it seems counter-intuitive that a telecommunications company can bask in that kind of profitability.

This should spark great admiration. Until you come face to face with Safaricom.

Since its inception, the cellular communications giant has become, not only the dominant force in its market and in the country, but is also aiming to be a global player in telecommunications.

Its corporate logo dominates Kenyan life, leisure and landscape. The company’s sponsorships dominate sports and entertainment. It boasts over 15 million customers, just short of 2500 employees and is one of the biggest and most powerful corporate forces in Kenya.

In fact, “dominance” is so embedded in everything about Safaricom, the megalith ranks cheek by jowl with every other corporate goodfella in history. Hardly surprising that Safaricom now earns the moniker, “Cosa Nostra”.

Communications Commission of Kenya (CCK) is slow to get its teeth into what most Kenyans believe is an extortionist and virtually monopolistic telecommunications giant in the shape of Safaricom.

After decades of suffering Telkom Kenya's take-it-or-leave-it bullying, Kenyan's — and especially the disadvantaged majority deprived of anything but the most rudimentary telephone access — welcomed the arrival of cellphones in the early 2000s. Since then the devices and their multiplicity of noxiously intrusive and expensive add-ons have become ubiquitous features, spanning the spectrum from indispensable lifeline to faddish status symbol. And the docile masses love them.

What lurks beneath the surface of Cosa Nostra though is as dark, rank and untouchable as any secret society. It is also symptomatic of the worst in Kenya’s backwoods version of a telecommunications industry.Safaricom's product across the range is massively overpriced compared to those of its competitors, ensuring Kenyans remain in the telecommunications Dark Ages. While this has always been true of cellular voice communication, it is most keenly felt in data comms where fees would elicit a standing ovation at any convocation of la cosa nostra.

Transparency and truth are shrouded in its cacophony of multi-layered marketing. It treats its clients as would the best drug dealer in any ‘hood, ensuring their “addiction” is fed and they’re kept blissfully comatose. Safaricom's dysfunctional notion of client service is the epitome of the oxymoronic concept of “nurturing disdain”. Michael Joseph should try to call customer helpline to see whether he will get through. He should also place a call to Zain's customer services number and see for himself what good service should be.

Despite the internet’s unparalleled potential for social upliftment, education, progress and bridging the chasm between the unsophisticated, know-no-better, have-not majority and the wealthy minority, it remains shackled behind prohibitive costs, patchy and unreliable networks, intransigent “systems”, myopic business models and the damned stampede to maximise profits at any price. Safaricom's stunning success since its inception bears testament.

It costs the equivalent of Ksh 2500 a month to have unlimited, instantaneous, go-anywhere internet access in the US. The closest Kenya comes is a pitiful 1GB ceiling that costs upward of Ksh 3000 at snail’s pace speeds, excluding the extortionist Ksh 4000 price of a modem. Vast swathes of the country also have no effective 3G network coverage meaning you will most probably be on the painfully slow GPRS.

For one of the most powerful economies in Africa, the internet and free communications remain luxuries, privileges reserved for the megarich. The country’s suspect telecommunications giant will do everything in its power to ensure it stays that way. You don’t make Cosa Nostra -type revenues from ubiquitous free “products”.

In fact, it has taken me two weeks of navigating Safaricom’s labyrinth of duplicity, half-truths, Obfuscation through Multiplicity (a clever type of sales warfare in which companies carpet bomb the consumer into numb, blind submission by overloading them with choices) outright contradictions, falsehoods, misinformation and impenetrable but utterly unhelpful call centres— only to be met with frustration at every turn. In fact, the most helpful people turned out to be Safaricom’s competitor, Zain!

While it is unconscionable that an outfit with 15 million customers does not even think a complaints centre might be a good idea, why would you be surprised that promises to return 15 phone calls, only two were kept? Can't they call me???

The result is I have absolutely no trust in anything Safaricom promises, publicly or privately. And probably never will.


And don’t expect any joy, let alone progress from CCK; ostensibly the industry regulator, it is utterly ineffectual, toothless and lost in senile dementia and unless its Director General has had a road-to-Damascus experience in the past few months, having him in control of communications is like leaving the kids with Michael Jackson for the holidays.


Willis Arodi is the author of: Some of my best friends are drunkards

Weaknesses of Zain's business model

1.ABSTRACT

In this essay, I discuss the current mobile telephony environment in Kenya with special emphasis on Zain's performance in relation to Safaricom's and drawing parallels between the two mobile phone companies. The performance will cover a brief history of Zain, it's business model , weaknesses, and it's financial performance since inception.

This essay will also attempt to offer solutions on how Zain can increase its Average Revenue Per User (ARPU) thereby improving its bottomline.

Kenya's future telecommunications scenario

About a week ago President Kibaki and the PM went to launch the cable station that recently finished construction. TEAMS is an underwater fibre-optic cable being installed along the coast of East Africa — a tremendous boost for all the countries affected. When it comes to internet bandwidth, Africa has always been left behind, thanks to monopolies and poor legislation with devastating effects on its economies and quality of life. I might sound dramatic, but if one takes into account that the digital divide is currently increasing at an exponential rate, it is not far-fetched to once again call us the “dark continent”.

Our primary source of international bandwidth is supplied by the very limited and slow satellite connection, which is also divided up by major operators such as Telkom Kenya. This leads to very low bandwidth actually reaching end users.This is not, however, what the rest of the world calls “broadband”.


True broadband is at least 4 megabits per second (Mbps) and is theoretically uncapped. True broadband is the ability to use the internet without taking the amount of consumption into account. US citizens use internet TV services like hulu instead of having to subscribe to hundreds of channels. Once we have this attitude we can call what we have in Kenya“broadband”. TEAMS might not be that enabler, but it sure does get us one step closer.

TEAMS will boost our bandwidth to 1.28 terabits per second (Tbps). This increase in bandwidth will theoretically make it much cheaper for service providers to buy wholesale bandwidth. These cost savings can then be passed on to the consumer and make it much cheaper to transfer large amounts of data.

Now it is important to remember that “cheaper” internet in Kenya does not mean that the base cost of having “fast” internet will suddenly drop to Ksh100. No, there are still businesses that are built up around a revenue model that relies on customers spending more than Ksh300 for example. If the price is suddenly Ksh50 for instance, those businesses will fold, regardless of how cheap bandwidth might be.

Instead, what we might see in Kenya over the next year (TEAMS goes live in about 3months) is a dramatic increase in the amount of “capped” data we can get for the same amount of money. A big problem currently is that networks in Kenya are currently unable to use all the extra bandwidth properly. Telkom Kenya for instance cannot easily jump above what it currently offers due poor quality cables and infrastructure. But Kplc, KDN and a few cellular operators have started investing in land-based fibre cable, right to the curb in some areas. This means that these players might be the first to actually be able to use the wave of extra bandwidth.Safaricom has also started to enable 7.2 Mbps HSDPA on its network, which theoretically means that if you wanted the fastest broadband line in Kenya, you have to go 3G.

So what does TEAMS mean for Kenyan end users in the near future? In my opinion, a few things will happen. First (the next 6 months) I believe networks will try to get maximum profits because bandwidth is suddenly cheap. This will lead to increasing pressure from end users, and then we can wait for an ISP to offer a “disruptive product” which will cause all subsequent offers from ISPs to drop tremendously in price. The fact of the matter is that ISPs in Kenya have always been used to low-profit margins and can easily adapt their businesses to once again operate on those margins once bandwidth is cheap. It will only take time.

This is an exciting time for communications in Kenya — we are in a perfect storm of situations which can contribute to a sudden reconnection to the world.