Safaricom

Safaricom

Type	Public. Owned by Vodafone 40% & Permanent Secretary (The Treasury) 35%
Industry	Telecommunications
Headquarters	Nairobi, Kenya
Key people	Robert Collymore, CEO.
Products	G.S.M.-related products
Revenue	$1.428 Billion (2013)
Operating income	$293.103 million (2013)
Net income	$198.850 million (2013)
Number of employees	3000+
Website	www.safaricom.co.ke

Safaricom, Ltd is a leading mobile network operator in Kenya. It was formed in 1997 as a fully owned subsidiary of Telkom Kenya. In May 2000, Vodafone Group Plc of the United Kingdom acquired a 40% stake and management responsibility for the company.

As of December 2, 2016, Bob Collymore is the CEO; he succeeded Michael Joseph on November 1, 2010, after Joseph's ten years as Safaricom CEO.^[1] Robert Collymore has spent most of his career in the telecommunications industry starting with British Telecommunications where he held a number of marketing, purchasing and commercial roles over a 15-year period. Recent reports appearing in the cross section of the press indicate that Vodafone Plc of UK only owns 35% and the remaining 5% is owned by a little-known company, Mobitelea Ventures Limited. The reports have caused a stir which led to the summoning of its CEO Michael Joseph to appear before the PIC "Public Investment Committee", during which he denied knowing who the other shareholder is. A spokesman for Vodafone said "the PIC has no powers to investigate M&A activity (see Mergers and Acquisitions), only to ask to view company accounts of Vodafone Kenya Limited, a company registered in Kenya. Mobitelea Ventures Limited were granted an option to purchase 25% of Vodafone's shares which they completed in 2002, Vodafone bought back half of the stake in 2003 for $10m,^[2] and in the financial year ending 31 March 2009 purchased the remaining indirect equity stake of 5%, thus returning Vodafone to its original 40% stake-holding.^[3] Vodafone said that whilst it would like to disclose who owns Mobitelea it is unable to because of a confidentiality agreement.^[2]

Safaricom employs over 1,500 people mainly stationed in Nairobi and other big cities like Mombasa, Kisumu, Nakuru and Eldoret in which it operates retail outlets. Currently, it has nationwide dealerships to ensure customers across the country have access to its products and services.

As of January 2010, Safaricom boasted a subscriber base of approximately 12 million, most of whom are in the major cities - Nairobi, Mombasa, Kisumu and Nakuru.

Its headquarters are located in Safaricom House, Waiyaki Way in Westlands, Nairobi. It has other offices in the city center in I&M building, Kenyatta Avenue, on Kimathi Street and at Shankardass House, next to Kenya Cinema Moi Avenue.

Its main rival is Airtel Kenya. Other rivals include Essar's YU (which they recently purchased, in conjunction with Airtel)^[4] and Orange Wireless.

Safaricom has charitable functions where it helps the less fortunate in the society mostly through the Safaricom Foundation.

In November 2012, Safaricom announced it would be offering a new mobile phone banking product in conjunction with the Commercial Bank of Africa, tapping into an underdeveloped financial services market.^[5] In 2014 Safaricom partnered with Britam and Changamka Micro Health to provide insurance to Kenyans with low income. It is known as Linda Jamii.^[6]

History

Safaricom was started in 1993 as a department of the former state-owned telecommunications operate, Kenya Post and Telecommunication Corporation. In 1997, Safaricom Limited was incorporated as a private limited liability company with 40% ownership held by Vodafone Kenya Limited. In 2002, it was converted to a public company while the government held 60% of the shares, 25% of which would be auctioned off in 2008 on the Nairobi Securities Exchange.^[7] Safaricom has introduced a number of services to Kenya and been a leading player in the mobile market and national economy.

Flashback service

As a result of the limited income of most of Safaricom's customers, network congestion emerges from a practice called 'flashing'. Flashing is the practice of calling another mobile user, but disconnecting before the connected call is answered. It provides a method for mobile users to alert someone that they wish to be called, but either can't, or won't, pay for the call. The method is cost-free for the users; but costly in network bandwidth.

That is why Safaricom sometime ago introduced a flashback service that gave every subscriber five free SMS messages with a single pre-defined message stating "Please call me. Thank you". Although the messages can be annoying when sent just for fun they are very useful when one is in trouble and has no airtime. It also gives parents more of a reason to get mobile phone for their children without the real need for getting them airtime. However, at this time, the flashbacks can only be sent to Safaricom subscribers due to some feuds with Airtel, Safaricom's main competitor.

Electronic cash service

Safaricom has developed and launched nationwide a mobile banking service called M-PESA, that allows Kenyans to transfer money via SMS.^[8] The service does not require users to have bank accounts, an important aspect in a country like Kenya, where many people do not have bank accounts. With M-PESA, the user can buy digital funds at any M-PESA agent and send that electric cash to any other mobile phone user in Kenya, who can then redeem it for conventional cash at any agent. This system is remotely comparable to hawala banking or services like Western Union. An M-PESA-enabled mobile phone can also function as an electronic wallet and can hold up to 100,000 Kenyan shilling.^[9] Safaricom stakeholder Vodafone, which partnered in the development of M-PESA, has announced that it intends to roll out M-PESA internationally as well.

Kipokezi service

Safaricom launched the Kipokezi service in May 2000 that enabled its subscribers to send and receive email and online chat through standard mobile phones.^[10] Any phone with SMS service can use Kipokezi.^[11]

Prior to the service fewer than one in ten Kenyans had accessed the Internet but the Kipokezi launch allowed more than a third of the population to exchange email and online chat messages.^[12] The Kipokezi is provided by ForgetMeNot Africa.^[13]

The service does not require users to have an Internet connection as it uses ForgetMeNot Africa’s Handset Initiation technology.

Other services

Safaricom together with many other companies have partnered come up with different services for use by the public ranging from weather updates to market prices and even entertainment updates. The company has plans to provide Wi-Fi internet connection in large malls, SMEs and government agencies in Kenya ^[14]

With regards to customer support services, the company has chosen to reduce support via phone calls opting to use the social media especially Facebook. Customers calling the support numbers receive an automated message informing them about support via social media sites, the call then automatically disconnects with a message saying that all customer support representatives are busy.^[15]

M-PESA

History

M-PESA (M for mobile, pesa is Swahili for money) is a mobile phone-based money transfer, financing and micro financing service, launched in 2007 by Vodafone for Safaricom and Vodacom

M-PESA was originally designed as a system to allow microfinance-loan repayments to be made by phone, reducing the costs associated with handling cash. But after the pilot,testing it was broadened to become a general money-transfer scheme.

How it works

Once a user registers for M-PESA, they pay money into the system by handing cash to an M-Pesa agent, who then credits the money to the user’s M-Pesa account. The user then gets an SMS notifying them of the transaction.

A user withdraws money by visiting an agent, who checks that the user has sufficient funds before debiting the user’s account and handing over the cash. An M-Pesa user can also transfer money to others using a menu on their phone. Cash can thus be sent one place to another instantly, safely and easily. This is in contrast to the preferred system before where money was sent by a porter, usually a friend, relative or bus crew, to the intended recipient.

M-PESA was first launched by the Kenyan mobile network operator Safaricom, where Vodafone was technically a minority shareholder (40%), in March 2007. M-PESA quickly captured a significant market share for cash transfers and grew to 17 million subscribers by December 2011 in Kenya alone

The growth of the service forced formal banking institutions to take note of the new venture. In December 2008, a group of banks reportedly lobbied the Kenyan finance minister to audit M-PESA, in an effort to at least slow the growth of the service. This ploy failed, as the audit found that the service was robust. At this time, The Banking Act did not provide the basis to regulate products offered by non-banks, of which M-PESA was one such very successful product. As at November 2014, M-PESA transactions for the 11 months of 2014 were valued at KES. 2.1 trillion, a 28% increase from 2013, and almost half the value of the country's GDP.

On November 19, 2014, Safaricom launched a companion android app Safaricom M-Ledger for its M-PESA users. The application, currently available only on Android, gives M-PESA users a historical view of all their transactions.

M-Pesa’s usage and success in Kenya

M-Pesa has been particularly successful in Kenya, compared to mobile money platforms in other countries. Contributing factors here include the exceptionally high cost of sending money by other methods; the dominant market position of Safaricom; the regulator's initial decision to allow the scheme to proceed on an experimental basis, without formal approval; a clear and effective marketing campaign (“Send money home”); an efficient system to move cash around behind the scenes; and, the post-election violence in the country in early 2008.

During the post-election violence, M-Pesa was used to transfer money to people trapped in Nairobi's slums at the time. Some Kenyans regarded M-PESA as a safer place to store their money than the banks, which were entangled in ethnic disputes. Having established a base of initial users, M-PESA then benefitted from network effects: the more people who used it, the more it made sense for others to sign up for it.

M-PESA has since been extended to offer loans and savings products, and can also be used to disburse salaries or pay bills, which saves users further time and money as compared to doing so from banks.

M-PESA has a wide range of financial services including Person to Person, ATM withdrawal, Payments, Bulk Payments and Bank to M-PESA

As of January 2016, M-Pesa is used by 21.8 million Kenyans, with over 1.5 million of M-Pesa users using the bill payment feature. At the time M-Pesa had a network of over 90,000 agent outlets.

Average value of monthly person to person transfers on M-Pesa was Kshs 106B while Person to Business transfers were at Kshs 23.5bn and Business to Person at Kshs 27.8bn per month.

M-Pesa achieves financial inclusion through the provision of solutions in partnership with a number of banks. M-Shwari and KCB M-Pesa are two such services, which provide access to savings and loans to users.

Elsewhere

South Africa

In September 2010 Vodacom and Ned bank announced the launch of the service in South Africa, where there were estimated to be more than 13 million "economically active" people without a bank account. M-PESA has been slow to gain a toehold in the South African market compared to Vodacom's projections that it would sign up 10 million users in the following three years. By May 2011, it had registered approximately 100,000 customers.^]The gap between expectations for M-PESA's performance and its actual performance can be partly attributed to differences between the Kenyan and South African markets, including the banking regulations at the time of M-PESA's launch in each country. According to Money Web, a South African investment website, "A tough regulatory environment with regards to customer registration and the acquisition of outlets also compounded the company's troubles, as the local regulations are more stringent in comparison to our African counterparts. Lack of education and product understanding also hindered efforts in the initial roll out of the product." In June 2011, Vodacom and Nedbank launched a campaign to re-position M-PESA, targeting the product to potential customers who have a higher Living Standard Measures (LSM) than were first targeted^]

Despite efforts, as at March 2015, M-PESA still struggled to grow its customer base. This comes as no surprise as South Africa is well known for being ahead of financial institutions globally in terms of maturity and technological innovation. According to Genesis Analytics, 70% of South Africans are "banked", meaning that they have at least one bank account with an established financial institution which have their own banking products which directly compete with the M-PESA offering.

Tanzania

M-PESA was launched in Tanzania by Vodacom in 2008 but its initial ability to attract customers fell short of expectations. In 2010, the International Finance Corporation released a report which explored many of these issues in greater depth and analyzed the strategic changes that Vodacom has implemented to improve their market position.[23] As of May 2013, M-PESA in Tanzania has five million subscribers

India

M-PESA, was launched in India as a close partnership with ICICI bank in November 2011. Development for the bank began as early as 2008. The service continues to operate in a limited geographical area in India. Vodafone India had partnered with both ICICI and ICICI bank, ICICI launched M-PESA on 18 April 2013. Vodafone plans to rollout this service throughout India. The user needs to register for this service by paying 100 Rupees, on which 25 Rupees will be credited back to the users account and there are charges levied per M-PESA transaction for money transfer services and DTH and Prepaid recharges can be done through M-PESA for free.

Controversy

Safaricom has been accused of unfair competition and has tried to discredit its competitors in recent years.^[16]

Internet connectivity

It was the first company in East Africa to possess 3G Internet technology with recent success of 4G / LTE connectivity currently in Nairobi and Mombasa. Safaricom use LTE (advanced)

Frequency band

2G service on 900 MHz and 1800 MHz. 3G DC-HSPA+ service on 900 MHz & 2100 MHz. Safaricom later launched LTE-A (4G service with carrier aggregation) service in Nairobi and Mombasa on band 20 (800 MHz) and band 3 (1800 MHz) in December 2014 and has expanded to other cities.^[17] Airtel and Telekom Kenya have expressed dissatisfaction with the way the regulatory body C.A.K awarded Safaricom its LTE license to operate at 800 MHz.^[18]

See also

• Mobitelea Ventures Limited

References

External links

• Official website
• Safaricom Foundation
• Emerging Market Telecom Company Analysis (Safaricom Ltd)