Safaricom as Kenya's Amazon...A Case for State Monopoly Capitalism


#1

Its been a while since Safaricom’s Market Cap just crossed Ksh 1 trillion,Its fact that Safaricom dominates marketshare in Voice,data,sms,financial services,SME enterprise cloud services e.t.c.In literal sense,Safaricom,as a telco,has a huge say on the next big tech thing here in kenya,that we cannot ignore.Let us not ignore safaricom is still a publicly traded company looking for growth and it has its fingers in so many pies i.e. Little (Taxi hailing) , Masoko (ECommerce) ,Safaricom Home fibre (Residential internet)…So the question becomes,with its huge financial war chest,unwavering government support,annual superprofits…is safaricom,for all intents and purposes,our best case of State Monopoly Capitalism in action and what is its impact/effect on the future of technology innovation and adoption in Kenya…Something we should think about and discuss,Your thoughts please?


#2

What if all its growth & expansions are pushed by the government without our knowledge?


#3

That’s the hard part to figure out,most of this growth and expansion is being funded off safaricom’s balance sheet,it has already allocated billions annually to invest in its network and exploring new areas of innovation.With annual superprofits,safaricom can afford to counter and upset rivals/competitors by taking a long term capital intensive strategy of capturing marketshare at the expense of short term profitability.Safaricom also seems to enjoy a lot of Government support and cooperations,from permits,moving equipment,land allocation,property allocations,tax/import exemptions e.t.c therefore have the ability to move swiftly into a sector,establish partnerships and rollout.With their humongous marketing budget,safaricom can easily get media houses,social media influencers,bloggers and billboards talking and showing their products and services.With the government already owning a significant stake in the company plus the billions it gets from them as a taxpaying entity,the government and the competition authorities can’t and will do nothing to upset this balance as it is against its vested interests.In the long term,data collected and aggregated from the safaricom platform can be used to inform NSIS in their surveillance operations and for overall Government surveillance on its citizens.


#4

That sounds improbable given the government has a significant stake in a direct competitor.

Ridiculous statement if ever there was one.


#6

Safaricom is a dominant player but for the purposes of this thread it is very difficult to accuse them of engaging in monopolistic or cartel like behaviour. I would argue that they thrive because of their direct competitors that are either mismanaged (Telkom under Orange) or lacking investment from their mother companies (Airtel, Yu and again Telkom under Orange).

The local market is young and still has a lot of opportunities for competent companies and ideas to emerge.


#7

I concur with you. Hardwork and success should not be mistaken with the aspect of having monopolistic tendencies.

Once upon a time, Kencell was bigger than Safaricom (2000 - 2004). During that time, Kencell had the creme dela creme on their network. It was more appealing to the middle class and upper class in society. Well well well, even the few I know of that managed to Sagems, Bosch, and Alcatel phones were hoked up on Kencell.

Before, 2000, Telkom operated a mobile network for nearly a decade that required one to part with 200,000BOB!!! for a simcard only!!!

I remember an advert of Kencell bragging of having over 4 million customers in 2004 against Safaricom’s 1 million. But things took a change when Safaricom decided to slash the simcard price from 5000bob to 2500bob, down to 250bob and then 99bob. Kencell remained put with their 10,000bob fee for a simcard.

Safaricom introduced cheaper phones like the Motorollas that were going for 12K. Keep in mind, Ericssons and Sonys and Samsungs and Nokias were selling for 20K+

Safaricom decided to adopt the per second billing but Kencell stuck with per minute billing.

Safaricom dropped call connection fees.

I remember using dial up for internet in 2005 on my first phone. Kencell was charging 5bob per minute against Safaricom’s 10bob per minute.

Safaricom introduced GPRS after Kencell and it was cheaper. Later Safaricom introduced EDGE and it was faster.

Then Mpesa happened. This was the killer.

Then 3G, then 4G.

Success should not be mistaken with monopoly.

When Safaricom was burning the midnight oil, other telcos were enjoying their sleep.


#8

Very fantastic explanation. Its all great business strategies. In the telecom business once you get ahead and keep innovating, its hard to be overtaken unless your hit by a major technology change or some unexpected catastrophe. With Safaricom’s balance sheet size its hard for a competitor to match what they invest in the network annually.


#9

They have spent 30 billion + each year since 2014.


#10

HOLD UP!!! 200K for a sim card??? Ngai Fafa, hii imenishtua.


#11

Usistuke. That’s how things were. I remember Biwott stealing the limelight with an Ericsson GH-series. Can’t recall the exact model no.


#12

mm nilibuy safcom line 50bob 2007 but i remember in early 2000s my uncle had a card like atm card (kencell) he went and inserted it in those kencell booth and called his frends … …


#13

The solution to conglomerates is outcompeting them. Nimble firms have an advantage in speed and responsiveness (which Safaricom had circa 2000), grow and then have capital as an advantage, but they take longer to react. The Org by Ray Fisman & Tim Sullivan goes into this phenomenon in greater detail.


#14

The Kenyan government won’t let that happen without putting up a fight. They are the major shareholder and earn so much from Safaricom.

Last year, the government earned Sh 31.26 BILLION from Safaricom

  • Sh 17.66 billion in taxes
  • Sh 13.6 billion in dividends

That is 1.36% of last year’s budget.

That number seems to be going up every year.


#15

i agree with trey,the government is too vested in safaricom now to let any competition reduce its profitability,so it is possible that the government may hinder or limit the ability of competitors to make significant gains in new technology,services and products.