Telkom Kenya beats Zain to Safaricom’s top dealer

Kenya’s third largest telecoms operator Telkom has signed a partnership agreement with Mobicom, one of the country’s top dealers, staging the first coup in a market that is expecting major shifts in the next six months with the entry of a new operator.

Mobicom, terminated a similar deal with market leader Safaricom, and was said to have been headed for Zain – the second placed service provider that is preparing for a relaunch of its services under a new brand name following the acquisition of the company by India’s Bharti Airtel.

This leaves Telkom as the deal breaker who has not only pulled the rug from under Safaricom’s feet but snapped the deal from Zain, who until last week, was said to have been talking to a number of dealers, including Mobicom.

Telkom Kenya on Wednesday announced that it had entered into a national dealership partnership with Mobicom that covers 85 per cent of Kenya’s population.

Telkom is estimated to control five per cent of Kenya’s mobile telecoms market, raising the question as to what Mobicom got in return for letting go the millions of shillings it earned from control of 10 per cent of Safaricom’s dealership revenue.

Mobicom is said to have negotiated a lucrative dealership contract that leaves it with near total control of Telkom’s business.

Under the agreement, all non-preferred dealers cannot buy services directly from Telkom Kenya but from the preferred dealers.

The preferred dealers will earn a commission of 10 per cent on airtime sold while the non-preferred will earn six per cent.

Unlike Safaricom, Telkom is yet to start selling laptops through dealers and does not sell high-end phones through this channel.

The company’s dealers earn an upfront of 7.5 per cent on every internet modem sold.

Paul Ndung’u, a director at Mobicom and a shareholder in a number of listed companies at the Nairobi Stock Exchange, said Telkom’s decision to cut down the number of dealers and a recent deal with the government for control of the National Fibre Optic offers the company better growth prospects.

“Safaricom has hundreds of dealers while Telkom Kenya has trimmed theirs offering us a chance to make more money” said Mr Ndung’u.

Safaricom’s 400 dealers handled more than Sh5 billion worth of business per month by September last year – excluding the M-Pesa business estimated to have been worth more than Sh10 billion per month.

Together with the sale of the wireless internet modems, laptops and phones, the monthly business turnover handled by the dealers stands at more than Sh20 billion a month, making them key players in the telecoms market.