What could be in store for Mobicom at Telkom?
This is the question many are asking following the dealer’s termination of a lucrative contract estimated to have been generating Sh5.4 billion (10 per cent of total Safaricom’s dealership revenue) per year for a similar deal with the third placed operator that controls a tiny 5.4 per cent market share.
Mobicom’s negotiations with Telkom are said to have lasted more than an year without a hint to the media or Safaricom, which continued to work with Mobicom until it received the termination latter on July 20.
It took Business Daily three separate interviews with Mobicom’s chairman Paul Wanderi Ndung’u to get to the heart of matter.
Below are excerpts of Mobicom’s discussions with us.
Mobicom has been the biggest dealer for Safaricom for the last 10 years, why the sudden switch to Telkom?
The telecommunication market is changing, which calls for radical re-strategizing. As a business we had to find where our next growth opportunity will come from and which operator business plan fits well with ours as we move forward.
Dealers earn commissions from the sale of airtime and SIM cards. Does it make business sense to leave a company with 15 million subscribers to join a firm with less than 2.5 million subscribers?
The decision is informed by research showing that we stand a better chance to grow in Telkom Kenya than in Safaricom.
Telkom has more products in its stable than any other operator. It has landline services, mobile networks, CDMA and is soon launching its money transfer service and 3G network. That gives us a variety of products to push into the market to earn good revenue.
It is also important to remember that the voice penetration in Kenya stands at not more than 50 per cent while data is less than 10 per cent.
Telkom has trimmed down the number of its dealers giving us a vast opportunity to grow.
You have managed to ride on the rapid growth of Safaricom to build a multi billion shilling dealership. Is it a mark of betrayal to terminate your contract at a time when Safaricom needs you most?
This is a conscious business decision that we made and in the next two years people will come to understand why we did it.
Our bet is that Telkom will be far ahead of its competitors and we will be there to earn our share of the revenues.
France Telecom (with a 51 per cent stake in Telkom Kenya) has beaten rival Vodafone (with a 40 per cent stake in Safaricom) in nearly all markets where both operate, including the UK and it is rational for one to think of Orange beating Safaricom right here in Kenya.
How do you see the mobile telephony market — which has been dominated by Safaricom despite the entry of new players — shaping up in the future?
The history of mobile telephony in Kenya shows that Safaricom has managed to beat its rivals by simply getting one thing right — the dealership.
Dealers have been Safaricom’s greatest pillar. When Celtel, now Zain Kenya, entered the market it was much stronger than Safaricom but it decided not to do business directly with local dealers and instead forced the locals to sign agreements with foreigners.
The misfortune here was that the foreign dealers concentrated on the upper segment of the market, starving the very fertile mass market. That was a costly mistake that the company has had to live with for a very long time.
Local dealers have proved to be much more aggressive and that is why Safaricom’s products and services are accessible even in the remotest corners of Kenya.
From now henceforth, this is going to change. A lot of realignments are going to take place that will completely change the telecoms landscape.
Are you seeing other dealers switching camps or is it just an isolated case of Mobicom?
It is just a matter of time before you start seeing other dealers follow Mobicom’s footsteps.
How can you describe your relationship as a dealer with Safaricom during the many years that you have been partners?
We have had a good working relationship with a few hitches over things that really matter in business. Look, dealers have been Safaricom’s strongest pillar but there has been a feeling that they are not being appreciated as part of the success story.
Could this have contributed on your decision to terminate the contract with Safaricom?
Growing a business is not an easy thing. But as I said earlier our decision is informed more by the changing market dynamics and the need to chart a new course.
What are some of the virgin opportunities that local entrepreneurs should look out for in the fast evolving telecoms market?
There is room for growth for everyone taking into account that the voice market penetration stands at less than 50 per cent. The coming of the fibre optics also gives entrepreneurs enormous opportunity to go into e-commerce and other services such as data and content generation.
Besides, I strongly believe that e-government will open up the rural areas and create new business opportunities .
Dealers continue to earn some money from active SIM cards they have sold over the past decade. What happens to the ones you sold on behalf of Safaricom now that you have severed contacts with them?
We will not continue to earn any commissions on those cards. The commission should go to the sub-agents we were working with. Sub-agency contracts are much more flexible than dealerships.
How big is Mobicom and what new strategies are you bringing on board that will help Telkom Kenya?
We have a vast distribution network of 42 outlets that enables us to adequately cover 85 per cent of Kenya’s population. With this number of outlets spread mainly in rural areas, we plan to widen footprint across the country.