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Safaricom: The journey of telco giant

James Momanyi @jamomanyi

When a person turns 18, it marks a watershed moment when one is considered mature enough to live independently. But when the giant telco company Safaricom turned 18 years this week, it marked yet another remarkable spectacle in Kenya’s mobile phone revolution and economic transformation never seen before in the country and region at large.

The journey started in 1997 and during that period Telkom was looking for a partner and Safaricom appeared on the scene.

After painstaking boardroom meetings, an agreement was reached allowing Safaricom to be a fully owned subsidiary of Telkom Kenya, a telecommunication parastatal that was running telephone booths around the country.

Safaricom took up 17,000 customers to start its journey that 18 years later has turned into commercial behemoth on the continent with more than 29 million subscribers, over 200,000 agents with shades of green sprawled all over the country and an annual revenue in excess of Sh230 billion. Yet when it all started, the founders were basically penniless in comparison with the current market value of the company.

As the former Chief executive officer Michael Joseph, who was at the helm for a decade, noted yesterday during cerebrations to mark the company’s 18th anniversary, when the dream all started, nobody had an inkling of what lay ahead.

Joseph had received a call while in Spain to head the telecommunication start-up. He was then working for Vodafone and together with a small pool of employees they started the operations in an apartment in the Norfolk towers in Kijabe Street.

“We didn’t have a lot of money when we started. When Vodafone Group signed the deal in May 2000 and acquired a 40 per cent stake, we only paid $20 million (Sh2 billion currently) for the shares while Telkom Kenya shares were hypothetically valued at $50 million (Sh5 billion).

In fact the network collapsed a week after the launch because we had bought a very cheap system since we didn’t have enough money,” he said.

The start was bumpy and subscribers most of the time inundated the company with complaints about poor service wrought by network failure and poor coverage. Then there was the issue of unaffordable SIM card airtime, especially for the common mwananchi because the first cards were retailing at Sh2,500.

At one time during a media interview, Joseph famously accused Kenyans of having “peculiar calling habits”. “We didn’t have money then and so we wouldn’t keep up with the rising demand. We didn’t know Safaricom would grow that fast,” he said yesterday.

“I said Kenyans have peculiar calling habits because almost everyone was calling at the same time, which was around 5.00 pm, a time possibly they were leaving work and were complaining about the traffic jam and this brought problems to the system.

I kept asking myself ‘why are people calling at the same time’ and that is why I said Kenyans have peculiar calling habits,” he said.

The network problems were addressed by regular system upgrade but seven years after launch. The company also made the price of SIM cards and the airtime cards affordable over the years to attract more subscribers to the mobile provider.

It also lowered the denomination of its scratch card to Sh10 together with the launch of Sambaza (airtime-sharing) in 2005. Safaricom scored yet another first, possibly the biggest in the mobile phone revolution, when they launched M-Pesa in March 2007.

Joseph explained that M-Pesa was conceptualised when they realised that micro-finance lending companies were facing challenges of receiving and sending money. When they put to trial a system they had developed, they realised that the same companies were sending the money to others too.

Once the money transfer system was ready, they reached out to retailers to house the system but most shopkeepers were not ready and hence they decided to have their own agents working independently.

“When the system was finally launched, we had no clue it will be this successful because at that time there were no rules or regulations. But looking back I can credit the success of  M-Pesa to trust people had with the system. The secret was not technology but rather the trust people had with the system and agents,” Joseph recalled.

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