In December last year, Airtel wrote to the Communications Authority of Kenya (CAK) seeking its intervention in repressing/curtailing/cutting the legs (insert your own interpretation) of Safaricom. I thought Airtel was arguing that the public needs more choices, that the public is robbed etc….. but its just business tactics.
I have been looking for details of that letter by Airtel to CAK but now it has been published and almost verbatim. Please read it with a business mind and get to understand what Airtel is asking for. There is no way to write this without looking like I am defending Safaricom, so, now you know.
The gist of it is that Airtel wants Safaricom to spin off its businesses like Mpesa and cede their competitive edge which is pricing, its marketing campaign to be scrutinised before it hits the market, Safaricom base stations to be sold out to a third party, Safaricom to pay its competition higher for call termination, and Safaricom to allow national roaming free.
For many of us who operate a side hassle or a corner shop, think of the many times you have wished there was an authority that could knock your biggest competition out of their perch and give you a chance to run away with their business? Unfortunately for many, you don’t have that chance that Airtel seems to have gotten.
First, let us get it out of our heads that Airtel is a broke company, it is the fourth largest mobile company globally, and it brags about it locally in this Standard article. Here is the quote from that story.
“ Airtel is the fourth largest mobile operator in the world. Airtel is the second largest in Africa in terms of size and the largest in terms of 3G network in Africa,” he said adding that Airtel was one of the first to launch 4G network in Africa. “I launched it (4G network) in Rwanda, and in Seychelles,”
You don’t get to be fourth largest by being broke, but I am sure Airtel will also say that the Kenyan unit is independent from the parent company.
Without favouring Safaricom or Airtel, let us take the business angle and evaluate what Airtel is asking the regulator, and say a prayer, hoping that we also get to demand of the same from our competition. I can do with a version of this regulator, to just ask/demand my competition, that is doing so well, to cede their ground to me. Forget whatever effort or time they took, I just need it.
I was a bit disappointed that Airtel was raising the issues, a company that has been operating in Kenya for the last 15 years. At some point in the early 2000s, the two companies were head to head, then per second billing came up and Airtel/Kencell was slow to react…
So, what are the salient issues in that letter?
1. Market dominance
I think its time that we got to know who has market dominance in what areas. There is a process set out in the new Act, that stipulates what a dominant player should or shouldn’t do. I don’t think that it will be a death sentence if Safaricom is declared a dominant player, they are, in GSM voice and SMS, that is from sector statistics in Q3 last year.
But to be declared a dominant player, the CAK must do a sector wide survey and identify the players that dominate areas like Internet provision, voice etc. That takes time and there is no regulator that would make a declaration of dominance without an attempt at a survey….That will take time.
While discussing the issue of dominance, we can also ask whether Airtel has done the same in a market like Zambia where they are dominant with 80 percent of the market share. Are they allowing the competition to use their national infrastructure free, coz in such cases, the competition would have no motivation to invest in network expansion- why when you can use free?
From the story, it seems that Airtel has a problem with Safaricom’s innovation as demonstrated in products like Mpesa and marketing promos like Tetemesha, but the nerve to say that the public or the regulator to scrutinise the marketing or campaign budget is amusing.
This maybe construed to mean that Airtel is devoid of innovation, and that their teams tasked with market acquisition do not work. Airtel seems to think that Safaricom has reaped more advantages from its innovation department.
We can start by reading this piece on how Airtel was stealing Safaricom’s thunder with the mobile money platform.
Airtel has been very innovative and from the days of sharing infrastructure with KDN, they have taken the market with some unique products.
Let us re-read this story of Access Kenya and Airtel partnering to provide affordable E1 lines via fibre. Think of E1 lines as the digital equivalent of old Telkom lines. It provides affordable communication for small and big companies and its a real virgin market.
That story was in 2011, when Safaricom was struggling with JTL fibre and didn’t even have a chance to even think of providing voice via fibre. By 2012, Safaricom was dealing with problems of not investing in fibre when it had to discontinue its unlimited bundle, a service Airtel was still offering. You can read my take. Safaricom has since laid its own fibre and is busy offering E1 services for the corporate market.
I can go into the details of interrelation between fibre and GSM voice but the upshot of it is that the sales from AccessKenya and Airtel would amount to Airtel lines and companies will spend on the network if you show value.
So, if by 2011, Airtel had a chance to beat Safaricom in one area it was still limping, why hasn’t it? Why hasn’t its partnership translated to more business?
Mpesa is also a big talking point, I think Airtel had lowered its mobile money transfer rates earlier than Safaricom, so what happened?
3. Infrastructure sharing
Airtel is suggesting that Safaricom spin off its base stations like it sold to Helios last year. Usually, mobile operators spin off or sell their towers if they are unable to make a business case out of it, or feel they can make more money. If a company feels that they are able to make money even with the passive infrastructure, it is in their place to do so; they must be assured that the company taking them over will make better use and more money that the company is doing.
Is it in Airtel’s place to direct the regulator to order/direct Safaricom to sell of its towers?
4. Marketing budget
Airtel has an issue with Safaricom marketing budget like Tetemesha promo, saying that none of the competition is capable of competing….even the fourth largest mobile provider?
Try telling one of the Tetemesha winners that Safaricom is bad…..or should be stopped from marketing….
What is the problem with Airtel?
My main problem was that in the lengthy letter, Airtel didn’t ask for anything practical, like the revision of spectrum fees. That is something the CAK can do, without involving Safaricom or whacking their legs in any way. Even though Safaricom’s threat that they will reduce investment is also smelly.
The regulator gets a lot of money in spectrum fees annually, ask for help there. There is also the Universal Services Fund, ask for help in expanding your network. That is something the CAK can do without passing the buck.
Let us explore the problems…..
1. Lack of investment over the years
There was a time Safaricom struggled with congestion, and Airtel was as clear as can be, but at some point, that must have stopped. In marketing, Airtel was there with promos and marketing activations, that has dwindled over the years.
Why would the network that was struggling with congestion, with poor call completion and handover rates according to the regulator, be the one that is expected to bail out in terms of national roaming services? Roaming is an agreement between two companies, does Airtel need regulation in that bit too because if the regulator allows free use, no guarantee that Airtel will invest in network expansion.
2. Too many expatriates
Sometimes back I was involved in a conversation with a former or disgruntled employee, who claimed that since Airtel entered the market, Indian bosses streamed in, even if they didn’t have to. It is their investment yes, but you can imagine doing market activation in Abothuguchi or Kendu bay and the guy leading the team is from India, yes, India has had lots of success but this is a different market that may require locals.
There is no guarantee that the locals will turn over profits but if there were any lessons with the South African expats in KDN; expats don’t equally have the magic portion, no matter the success they had in their home markets.
Leadership has a direct consequence to performance and stability. Maybe Airtel needs to look in before looking out for answers.
3. Group mentality
Yes, Airtel is a large group that has operations in several countries. But that is where it should stop. Marketing should be country specific. Some of those ads they run are Africa wide and may not resonate with users in some markets.
How about go back to the old ways of taking country specific approach?
4. Hopeless communication team
I don’t know what criteria Airtel uses to interview in their communication department but even village cattle dip operators have better response and communication from this department. These guys want to just bombard me with rubbish press releases but when I ask serious questions no response. You try to push, they send you an irrelevant speech that has nothing to do with what you were asking.
Yes, Airtel has a budget to entertain journalists and bloggers but how about they try answering questions and make sure there is another consistent telco voice in the media apart from Safaricom and at times Orange?
Airtel has made significant investment but they have also outsourced customer care and their bas stations, so technically, their risk is minimal in this country. Asking for regulatory capture/ curtailing of a publicly listed company is well within your rights.
Let us wait and hear what the regulator says…..