BY LUKE MULUNDA
Safaricom recently announced a Sh31.9 billion after-tax profit, breaking its own record in regional corporate earnings. The company’s board of directors extended the term of its CEO, Mr Bob Collymore, by two years, in what is seen as a move to maintain the growth momentum.
But how significant is two years for such a high-profile company? Mr Collymore says his focus now is to institutionalise what he calls a value-based leadership team to steer the company over the next 20 or so years. “Our customers have trusted us for the past 15 years because we have remained relevant to them,” he says. “For us to continue to do so, we have to get a deeper understanding of our customers’ needs and aspirations and to help meet them.”
It is this keener understanding of its customers and system that has kept Safaricom ahead of the pack in the fluid telecommunications industry where other players struggle to break even. While the company is churning out record profits from all its business segments such as voice, SMS, and data, all its peers in the industry are yet to hit the critical mass needed to turn in a profit.
Mr Collymore took over Safaricom in 2010 during a vicious price war that gave its distant second rival, Airtel, a fighting chance in the market. At the time, it appeared like Collymore had been set up to fail and some market observers even projected that was the end of the Safaricom surge. With M-Pesa catching on, it felt as if the innovation bag had been exhausted. Collymore took a different approach – and it is working.
“I took an early position that the price wars were not sustainable, and made a firm decision to strike the tricky balance between offering a competitive price to customers that would also enable us to earn a margin in order to continue to invest significantly in the network,” he says. “The toll of that price war was seen in the losses that some players experienced at the time and it continues to be felt to this day.”
With voice increasingly getting saturated, Safaricom under Collymore began to put more emphasis in growing non-voice revenue with a special focus on M-Pesa and data business. The market had incidentally aligned itself in favour of non-voice services and Bob Collymore went for the opportunity. “Kenya was on the cusp of a defining moment, the undersea fibre cables had finally arrived and their impact on lower data prices coupled with our investment in the right infrastructure meant that our subscribers were able to benefit from significantly lower data pricing,” he says.
This increased uptake of mobile Internet, which stimulated a new stream of revenue as handset makers responded with cheaper but faster smartphones that made it easier for users to access the Internet by increasing screen sizes. The company has also gone deep into corporate Internet and related services.
At the same time, the growing M-Pesa agent network enabled more payments and Safaricom invested in delivering products that went beyond the money transfer concept and won a bigger share of the market. Financial institutions came on board to introduce mobile banking and loan services riding on the M-Pesa platform and utility companies tapped M-Pesa for payment services.
“This was anticipated as part of our growth strategy, informed by the fact that we had already started seeing ourselves as an integrated services provider, rather than just a telecommunications firm,” Mr Collymore says. “Our investment strategy has always seen us invest in the technologies that we believe will transform our subscribers’ lives.”
Mr Collymore had a head start, as he was not entirely new to the Kenyan market. Before being appointed CEO, he was already sitting on the Safaricom board and had insights in the company’s business and local market dynamics. “I developed a strategy to guide the company in the coming years. We called this Safaricom 2.0 at the time and it entailed streamlining our business in order to align with the changing nature of the business,” he says. “This was geared at ensuring that we had the right people to take the business to the envisaged point.”
Safaricom has been so successful to the point of being branded a monopoly, controlling more than 70% of the voice market, with over 20 million subscribers. This raised a storm that led to the Communication Authority and Competition Authority of Kenya to sign an MoU that will guide the debate around dominance. But Mr Collymore has a different view about the company’s huge market command. “We believe that being dominant in itself is not a crime,” he says. “It is a factor of market forces that comes about when customers choose to support those providers who meet their needs in the most effective way.”
He says market dominance discussion should focus on instances of abuse of dominance, rather than just the arbitrary declaration of dominance.
While the company has for long stood out as the most profitable in the region, its share price movement tells the fortunes of Safaricom. Listed on the Nairobi Securities Exchange in 2007 at Sh5 a share, the telecommunications stock price dipped, hitting Sh2.90 just a year after Mr Collymore took office.
However, its recovery to an all-time high of Sh17.55 recorded last month marks one of the greatest achievements of Mr Collymore. “I rarely consider our share price when I am thinking about the growth of this company,” he says. “Our focus is delivering the right products and services for the customer, and giving positive returns to our shareholders and investors.”
Safaricom is increasingly the connective tissue that drives many segments of Kenyans’ lives – from making calls, texting, sending and receiving money, borrowing loans and paying for goods and services. “Our strategy is to transform lives and we achieve this by delivering value across many segments. Our customer interactions through various marketing campaigns and corporate social responsibility initiatives have also strengthened the bond between us and our customers.”
From a technology perspective, Safaricom remains a pacesetter. Recently it brought M-Pesa servers home from Germany and it was the first to introduce 4G, just as it pioneered 3G and 2G before.
He says the challenges have been few, with unlimited opportunities. “My key opportunity was figuring out how to maintain the growth story that had seen the company through its first nine years,” says Mr Collymore. “My task was to transition from the infrastructure-led strategic focus we had at the time. Safaricom had been very busy laying the foundations for its future growth, we needed to move towards leveraging those assets to deliver a differentiated mobile experience.”