Technology

The blind spots in the Safaricom's plan to become a technology company by 2025

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Safaricom PLC headquarters in Westlands, Nairobi. FILE PHOTO | DENNIS ONSONGO | NMG

We are from the annual reporting sprint in Kenya, waiting on expectantly across sectors to give a pulse on prospects, problems, and pivots from companies of interest.

As one of the most profitable companies in the East and Central Africa region, Safaricom's report always draws attention.

Apart from its continued stellar performance financially, it has good things going for it, for example, taking the honours in LinkedIn's 2022 Top Companies ranking.

It means the company resonates well with two key publics - customers and staff.

That said, the stock has taken a beating as international investors exit their positions, market dynamics have resulted in downward price reviews across various services, and Ethiopia presents political, regulatory, currency, and infrastructure risks.

Single-market operations for any business at scale hit a plateau at one point or another from saturation or competition.

Safaricom's move from its telco core to evolving into a purpose-led technology company by 2025 is its best bet.

However, the focus on driving its enterprise and SME portfolio across the digital business, Internet of Things, information, and communication technology - covering cybersecurity, connectivity with fibre to the home, and building on its financial services ecosystem under M-Pesa has a blind spot.

There is blood in the water reading from recent announcements by corporates in the adjacent space that is banking, most of whom have pan-African ambitions and a direct relationship with customers.

On Safaricom's risk radar regulatory and policy environment rank top; market disruption and an evolving competitive landscape rank fourth.

One Communications, Instaconnect, East Africa Tower Company, DigiFarm Kenya, and Safaricom Money Transfer may not all be familiar to you, but they are subsidiaries that are 100 percent owned by Safaricom.

Given the fluid competitive landscape, Safaricom, even with big-picture high CAPEX plays like market entry into Ethiopia, should get aggressive on acquisitions - technology and teams, and seeding of wholly owned start-ups.

Partnerships may hit unintended blockers with exposure to strict data privacy laws and what I refer to as data capital - insights gleaned from the behavioural analysis of millions of subscribers.

It is a lower-risk path to unlocking value while creating additional competitive moats.

What are the current moats you ask? First is the rich network of subscribers on telco services and monthly active users on its mobile money services.

Second, is its cash-rich position, where retained earnings or cash flow can be leveraged.

Third is its flick-a-switch access to other markets through associations and shareholder structures that it can use to find product market fit for research-informed product and service opportunities.

Akin to sending well-heeled armies from a central kingdom to claim new territories, this may deliver additional quick wins with real opportunities to plug into capital-seeking placement in Africa.

Njihia is the head of business at Safiri Express.