ZK closes shop over loss of Airtel deal

• The firm has in the past two years struggled to survive after it failed to attract other high-net worth clients to replace Airtel, which used to account for about 90 per cent of its revenues.
• Tanzania-based ZK expanded into Kenya in 2004 to take up the Airtel account, following a strategy it had replicated in other markets where it followed the telco. Tanzanian tycoon Zaddock Koli owns the firm. He is said to have enjoyed close association with Celtel board members.
• The loss has hurt its earnings on the continent, with ZK closing shop in Uganda, and Tanzania. Mr Koli had opened talks with local investors to sell the Kenyan unit, but the plan collapsed leaving the firm saddled with huge debts including unpaid salaries.
• The collapse mirrors increased competition and fragmentation of the local advertising sector which has led to Scangroup growing its market share by a large margin.
• Data from research firm Ipsos shows that market share of the top five companies has shrunk from 96 per cent in 2009 to 88 per cent in the first half of this year.
• The Ipsos data also shows that advertising agencies with at least one per cent market share nearly doubled from seven in 2009 to 13 in June, signalling increased competition.

Marketing services firm ZK Advertising Kenya Ltd has closed shop due to low business linked to loss of the Airtel account to rival agency Scangroup.

The firm has in the past two years struggled to survive after it failed to attract other high-net worth clients to replace Airtel, which used to account for about 90 per cent of its revenues.

“ZK recently stopped operations and its 27 staff have left the company,” said Mr Dan Muthoka, the firm’s finance manager, without giving details.

The exit of Airtel meant that ZK was left with a UK-based charity, Save the Children, as its key client besides other smaller assignments.

Tanzania-based ZK expanded into Kenya in 2004 to take up the Airtel account, following a strategy it had replicated in other markets where it followed the telco. Tanzanian tycoon Zaddock Koli owns the firm. He is said to have enjoyed close association with Celtel board members.

The association is best captured by the fact that ZK Advertising has always followed Celtel’s expansion trail. ZK’s entry in Kenya, for example, came after Celtel entered the market in 2004 upon acquiring KenCell. The trend was replicated in Nigeria.

Celtel has operations in 14 African countries with ZK handling the advertising business. “The firm’s chemistry with Celtel made it very difficult for other agencies to snatch the account from ZK,” said a player in the market who requested not to be named.

But the cosy relationship was dealt a blow when India’s Bharti Airtel acquired Zain and opted for rival Ogilvy to handle its media work.

The loss has hurt its earnings on the continent, with ZK closing shop in Uganda, and Tanzania. Mr Koli had opened talks with local investors to sell the Kenyan unit, but the plan collapsed leaving the firm saddled with huge debts including unpaid salaries.

The collapse mirrors increased competition and fragmentation of the local advertising sector which has led to Scangroup growing its market share by a large margin.

Data from research firm Ipsos shows that market share of the top five companies has shrunk from 96 per cent in 2009 to 88 per cent in the first half of this year.

Access Leo Burnett, Ogilvy East Africa, ZK, and Young & Rubicam lost between one and nine per cent of their market share in the same period to ScanGroup, Shekele, Saracen, and Transcend, among others.

The Ipsos data also shows that advertising agencies with at least one per cent market share nearly doubled from seven in 2009 to 13 in June, signalling increased competition.

“The market has become dynamic and some new players are doing good business,’’ said Mr Joe Otin, the media monitoring director at Ipsos, noting that the start-ups’ growth was driven by acquisition of new clients and takeover of others from established rivals.

vjuma@ke.nationmedia.com