FROM SECURITIES AFRICA/CITIBANK 5TH ANNUAL AFRICAN INVESTMENT CONFERENCE, LONDON
Kenya’s biggest mobile telecommunications company says it will continue to lead the market through its revolutionary mobile payment system M-PESA – already the world’s most successful with 9 million users – and through moving fast into data. Safaricom (www.safaricom.co.ke) has 78% market share (83% by revenue) and 15.2 million customers, according to Les Baillie, Chief Investor Relations Officer, and it will be hard for its competitors to catch up.
M-PESA, which allows people to do cash transfers using their mobiles, was originally started as a customer loyalty tool, but has soared ahead in proving the value of the mobile phone in bringing financial services to Africans. Now 22% of Kenyans are signed up as users and use it for a range of functions including paying their water and electricity bills, receive their share dividends (Safaricom paid 150,000 shareholders their dividends this way) and even buy airtickets and make international transfers, all using the mobile handset. M-PESA has 17,500 agents.
Non-governmental organizations are using it for payments in remote areas and it is increasingly being used as a way for microfinance institutions to make and collect loans. Future developments could be to use M-PESA as a tool to link people with small savings to banks and savings institutions, providing new opportunities for the unbanked to gather assets and interest, and to offer micro-insurance, etc. International transfers are reaching remote parts of Kenya through tie-ups to Vodafone and Western Union. M-PESA employs 12,000 including agents, but the knock on effect in terms of small enterprises in remote areas could be many times more.
Mr Baillie told institutional investors at the conference, organized by stockbrokers Securities Africa and Citigroup, that the core of Safaricom’s competitive strategy is to keep the voice customers happy “by offering the best network, the best coverage, the best services and other offers to subscribers to make them stay with us, including the bongapoints and competitions.”
He says as they drive into rural areas, the revenues per customer are dropping. Kenyans like to buy in small denominations, partly due to cash shortages and Safaricom now offers top up cards in KSh 5 denomination (approximately US cents 6.5).
Safaricom’s second strategic drive is data, boosted by the undersea cables which reached Kenya and offer massive opportunities, According to Mr Baillie, Safaricom have invested KSh1 billion ($130 million) into upgrading networks, including the only licence for the fast 3g data network technology and extensive investments into Wi-max networks. Some 500 sites have been upgraded to 3g and 100 are active Wi-max sites.
He says they offer companies a full range of solutions, and one of the top areas of growth will be small and medium enterprises as well as major companies such as banks which are starting to move back into rural areas as they find ways to do sustainable business there. He says they have 2 million data users and are one of Kenya’s biggest sellers of laptop and notebook computers as they can sell at cost, since their revenues will come from data usage. However, currently 90% of internet users are still using their mobiles and rapidly moving into internet technologies such as social networking.
Safaricom still believes customer service is its core, with 1,000 agents working at its call centre, one of the biggest and best in East Africa. It is also seeing how its Internet portal can stimulate growth. Safaricom hopes to remain number one and it seems hard to see how its competitors (nearest is Zain with 3 million customers) can catch up.