Uncategorized

The Consumer Trend That Could Hurt Safaricom

The funny thing about disruption is that when it starts happening the incumbent often tends to either ignore it completely or hardly pay attention to what is happening, until its too late. However, quite often, the very term ‘disruption’ is misunderstood or misplaced, to begin with. I am a keen observer of consumer trends or behaviours as that can be a strong indicator of where the market is going and not necessarily what a sector or industry thinks is actually happening.

As an example, think back to the time when EasyTaxi first launched in Kenya a few years ago, just before Uber and other taxi-hailing mobile apps became commonplace. I had a taxi guy called ‘Karanja’ who I had used for quite a few years. He was my ‘go to guy’ and at the time he had a ‘network’ of other taxi guys who could pick me and drop me or any of my family members wherever they needed to go. However, the thing is that his service was occasionally erratic and on more than a few occasions I paid the price for that.

I tried EasyTaxi sceptically for the first time. I pushed the button on the mobile app. I waited briefly. The EasyTaxi driver called me to reconfirm my location. He picked me up shortly thereafter. He dropped me where I was going. I paid less than 50% of what Karanja would normally charge me. My taxi commuting life changed from that moment onwards. It became ‘game over’ for Karanja. That’s how disruption happens. True. Story.

So, going back to Safaricom, it would appear that for all intents and purposes, nothing could ever disrupt them. I mean, look at the insane amounts of money that they make! They OWN mobile money in Kenya via the ubiquity of M-Pesa. They have the fastest and best 4G services in Kenya which I can attest to having done numerous speed tests with their competitors’ networks and discovering that none even come close. Safaricom is dominant – plain and simple – even as they deny it (dominant players never acknowledge their dominance – just ask Google and Facebook).

As a long-standing Safaricom customer, you would think I must be happy? However, I am not, 100% happy. My ‘beef’ with them is that in light of their market dominance, you would expect that they must be the best deal in town? They are not, which is the point of this blog post. If you look at the current offers from their competitors like Airtel, Telkom Kenya and Faiba, they all have better-priced data, voice and SMS offerings. This has not been lost on many of their existing customers.

My own observations of many youth consumers are that they have Safaricom lines but many only use it for 1) receiving phone calls and 2) sending or receiving M-Pesa. This means that even though Safaricom has 30+ million customers, many may not be using the network for data, voice and SMS services. I for instance struggle with the fact I pay Kes. 99 per day for 1GB of data but I know that the other mobile networks give you twice the data for the same price. It almost feels like Safaricom chooses to be mean or arrogant, or perhaps it’s just plain old hubris at play.

At a macro level, the above youth consumer trend where Safaricom is being relegated due to pricer offerings may seem trivial in light of the gargantuan amounts of money Safaricom makes. Indeed, the Safaricom mobile ‘ecosystem’ is at the peak of its powers and nothing seems like it could possibly hurt them. However, if this trend continues to gather momentum, there could be disruptive implications going forward. I am also reminded of the global trend where generation z and millennial consumers no longer like to make or receive calls (unless they have to?) and would prefer to send and receive texts or instant messages – also known as ‘data exclusives’.

At a micro level, the latest Communications Authority of Kenya quarterly sector statistics show that Safaricom once again lost market share as was the case in the previous quarter? Could this seemingly irrelevant or marginal decline be the first signs of a much larger trend happening due to a shift in mobile consumer behaviour happening at scale in Kenya? Could we be seeing the very first indications of how Safaricom could get disrupted? I’m personally not sure and it seems highly unlikely at this juncture. I am certain Safaricom is aware of what is happening so unless they react in a timely and aggressive manner, this trend has the potential to undermine their long term success as Kenya’s leading mobile network.

Previous post

4 Reasons Why Glovo Could Become Kenya's 'Killer' On-Demand Delivery Mobile App

Next post

The Biggest Website Traffic Winners & Losers of Kenya's Sports Betting Armageddon

8 Comments

  1. Em
    April 7, 2019 at 3:06 pm — Reply

    Very interesting read. I agree that it is very unlikely that safaricom would be disturbed at the top yet their pricing is pinching to say the least. It’s very hard to imagine their downfall but hey remember Rome? I think what would do them in is their inability to to take less in terms of profit and chabge with times . You see, economically things are bound to get even worse in Kenya and people will tighten the grip on that extra shilling. Sa are already used to certain profits and letting that go will be a problem. Thats where the cheaper options will steal the show. My two sense

    • April 7, 2019 at 5:50 pm — Reply

      Thanks for the feedback. Indeed Safaricom need to reassess their approach from a pricing perspective to be more customer friendly.

  2. SM
    April 8, 2019 at 3:48 am — Reply

    Couldn’t agree with you more. I have a Telkom & Safaricom line but also having tried Airtel’s services in the past. I use my Safaricom line for Mpesa, registering apps and ocassionally use their data for time sensitive tasks such as Uber & Taxify.

    Safaricom’s ubiquity is also a great benefit as I travel quite a bit and have noticed it has quite a bit of coverage over it’s rivals. That being said about 75% of my mobile spend goes to Telkom, primarily because of their super affordable daily data as well as a package costing 1,000/= that gives me 300 minutes talktime to any network, i think 400 sms and 7GB of monthly data as well as 200/= of bonus airtime on Telkom’s network.

    Safaricom can be commended for it’s quality of service despite the costs. In terms of affordability however Telkom takes it by a wide margin and I commend them on their strategy that seems to be working quite well. All that is left is to spread their coverage and promote T-Kash and it will be bye bye for Safaricom. Nothing personal!

    • April 8, 2019 at 6:38 am — Reply

      Thanks for the detailed insights on how you are using Telkom Kenya as an alternative to Safaricom. I hope Safaricom’s leadership reads this comment!

  3. April 8, 2019 at 10:51 am — Reply

    I opine that while Safaricom might lose big time on data and voice calls (I use JTL 4G for mobile internet, Telkom for voice).
    However, they have also disrupted other sectors and seem to be growing in spite their glaring weaknesses.
    Just last year they introduced PayPal to MPesa, faster and cheaper and most if not all freelancers forgot about Equity. I don’t know any freelancer who uses Equity PayPal anymore.
    I would like to see how money much that single move brought them in profit, I’m thinking it’s huge.
    Also, Masoko might be their next big thing.

  4. Ben
    April 20, 2019 at 3:44 pm — Reply

    The problem with other player is that their services are not to be found country wide,or if there ,they are of poor quality,specifically the signal.So a mamoth migration might still be at a far distance.Anyway,I have been using airtel data for 3 years now and never looking back,though am in Nairobi.

    • July 21, 2019 at 8:20 pm — Reply

      OK. Thanks for the insights. Yes, consumers will use what works best for them whether it’s the overall service delivery or the fact it’s also a cost-effective offering. Let’s see how things look in 5 years.

Leave a reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.