/ 25 August 2010

Bharti eyes mobile market leadership in Kenya

Zain Kenya plans to invest more than 25-billion shillings in the next 18 months in a bid to gain market leadership in the nation of 20-million cellphone users, its country managing director said.

Ranked the second largest operator by users in the country, Zain was acquired by India’s Bharti Airtel as part of an Africa-wide deal. The new planned investment is double what Bharti had initially said it will put in.

Last week, Zain halved its calling and SMS charges, sending shares of rival Safaricom skidding.

“We have started a new journey in the market and the journey is called market leadership,” Rene Meza told Reuters late on Tuesday.

“It is going to be a long journey, a very tough one. But for the first time in eight years, we have the right majority shareholders with the understanding and the mindset of what it takes for us to do in Kenya, to become market leaders.”

Although the firm that began as Kencell was one of the first players in the industry, it was hobbled by a focus on the top end of the market, locking out the majority of Kenyans who are on low incomes.

Safaricom, which typically accounts for more than half the shares traded each day on the Nairobi Stock Exchange, conquered 80% of the market by focusing on all segments, with post-paid services for the rich and prepaid scratch cards for as little as 20 shillings for lower-paid users.

“We are planning to invest over 25-billion shillings over the next 18 months. It is an investment plan we had to revise upwards,” Meza said.

He added Zain would increase its distributors to 200 from 80 and launch third generation (3G) internet access by year-end.

Under the first phase, the firm will focus on revenue growth, subscriber growth and revenue growth, before turning attention to margins.

“Profits and so on will come as we continue increasing our revenues, we continue increasing our customer base, we continue increasing our market share, we continue generating volume.”

Economies of scale
Bharti, which says it is the world’s fifth largest mobile operator, aims to inject massive economies of scale, acquired through its position in India, into the Kenyan operation.

“We are going to get a spillover effect of Bharti Airtel India in terms of getting the prices and the right cost structure to sustain the model,” he said.

“Those level of volumes, once they are cascaded to suppliers and to different partners, in Kenya or across Africa, will bring our costs structures dramatically down.”

Zain will extend its second generation (2G) network to cover the country and re-launch its mobile commerce service, Zap, which trails Safaricom’s M-Pesa by a very wide margin, he said. – Reuters