Emerging battle fronts for Safaricom, Orange, Yu and Airtel Kenya

Emerging battle fronts for Safaricom, Orange, Yu  and Airtel Kenya

It has been correctly observed that for the Kenyan Mobile Network Operator (MNO) the voice market is only a cash cow in a wide array of business ventures and revenue streams.  Last week I wrote about the epic battle between Safaricom and Airtel in the voice and Short Message Service (SMS) market. I shall call these engagements battles as they appear to be quite a number along a couple of frontiers that our MNOs will need to fight it out over time. This is all in the bigger, long term war among the operators for favor with Kenyan consumers.

In this post, I shall share some quick, simple thoughts on the various market frontiers
  1. The mobile money frontier

Safaricom’s M-PESA service in Kenya has in the past two years become a globally acclaimed success. It has revolutionised lives in Kenya. The country has also become an attractive market for products building on innovations around mobile money. All the other three MNOs have declared that they are not being left behind in the long term quest for revenues in this market and are propping up their counter-offerings to M-PESA. I have previously written about some of the sectors key success factors and potential pitfalls the you might wish to explore. I shall steer clear of  further associated debate in this post.
  1. The data connectivity services frontier

Earlier in 2010, Moses Kemibaro, a reknown Kenyan blogger also wrote on how Safaricom was slated to become the largest Inernet Service Provider (ISP) in Kenya. It appears Orange and Yu have since taken the cue and began engaging Safaricom on yet another battle - the mobile internet service connectivity battle. The battle on this frontier is bound to be so ruthless that traditional ISPs might be driven to the peripheries by the better funded, increasingly resolute MNOs.
  1. The online content frontier

In this frontier we expect to see more activity in the online content vending and advertising segments. Incidentally there are both international and local - home grown players in this market segment that the MNOs will have to contend with. The MNOs will at various points experience the might of global online content players. These are the likes of Google, Facebook, Yahoo and Microsoft and their interactions might include mutually beneficial partnerships or direct competition. Then there are the local content players, blessed with expert knowledge of the local culture and social landscape. It will be interesting to see how local niche markets emerge as local content developers become more creative in partnerships with the MNOs.
  1. The customer focus frontier

In Kenya we are more used to the term customer care. With ISO, ITIL and other global best practices becoming more popular among Kenyan firms, the usual contention on definition of terms will be unavoidable. However, whether we call it customer care, customer service or customer focus, this is the battle front whose intricacies are a little less obvious. Controversial matters on patriotic emotions and corporate social responsibility will remain customer focus concerns. However the matter of actual service delivery and support will become significant game changers. I shall reserve further arguments on this for a separate future post as opportunities arise.

The usual conclusions
On each of these battle fronts, it appears that we shall not be confined to the boredom of watching the usual two main protagonists (Airtel and Safaricom) fighting it out. Orange and Yu are already taking firm positions and claiming serious stakes on the new frontiers. These newer players are pretty much announcing that they shall not be mere by-standers.

It is almost obvious that the above competition will result in consumers receiving better services. They will be better facilitated to lead productive lives. Kenyan professionals will be engaged to come up with more innovative services whose success could be replicated to the rest of the world. M-PESA should be a good example on how great innovations can come from Africa. Sadly for some, the obscene profits margins experienced by dominant players previously will not be feasible. In the end we shall have created a more robust knowledge-based economy.

Finally, the pleasant realization from the promise of these impending battles is that in all the instances the consumer and the country wins.

Airtel Kenya vs Safaricom - When the bulls fought

Misplaced Application of Old Wisdom
An old swahili saying goes like ''Wapingapo fahali wawili, ziumiazo ni nyasi'. It means 'When two bulls fight, it is the grass that suffers'. When applied to competition in Kenya’s mobile network operator industry, it would mean that where two heavy weight players battle it out, it is the consumers that suffer.

I do not intend to despise the wisdom of our long gone ancestors but once in a while I am convinced we need to test some of the old wisdom for relevance in our dynamic times. In the current age of information, globalization and civil liberties some of our old sayings might have acquired a 'diminished relevance' status. When two large companies fight it is most likely for the attention of the consumer and the swahili saying may not apply to the situation.

The initial battle front
In October 2010, Airtel took on the mobile network market by storm, drastically lowering calling rates to Kes 3 (USD .038) regarless of the call destination network. Ostensibly this was a direct attack on Safaricom's dominance on the mobile communication market by a fairly capable opponent. There are those who did not believe that Airtel Kenya, then trading as Zain Kenya would sustain their ‘outrageously low rates’ - not previously imagined. We are such a pessimistic market that at some point some of our popular radio stations had call-in discussions whereby Airtel's move was ridiculed off to be unsustainable and suicidal.

Peculiar perceptions
We had got comfortable with then then reality that meaningful un-rushed mobile phone conversations were a reserve of those of us who were top of the pyramid consumers. The radio airwaves were filled with talk of either how Airtel was an unfortunate and disruptive spoiler or how Airtel had been brave enough to take the mighty Safaricom head on. What argument a caller or presenter would front on air would be largely dependent the following :-

  1. How accustomed they had become to Safaricom's high call rates about Kes. 11 (USD .138) and hence they were basically resisting change.
  2. How well they understood the fact that lower calling rates were good for the national economy
  3. What liberating effect they felt as they embraced the new reality of lower personal and business communication costs
  4. What sentimental and patriotic feelings were aroused in them by the common impression that Safaricom was 'our homegrown company' and that ‘our company’ was under attack

It appeared as though Airtel's categorical proclamation that the new rates were not temporary offers (and were permanent rates) did not reassure the pessimists. An earlier explanation by the Ministry of Information and communication officials that the forgoing call rates had been too high above the the operators' unit costs did not seem to convince the pessimists either.

Counter-offers and Tactical Retreat
Safaricom reacted with a temporary counter-offer to Airtel's new price. Orange Kenya and Essar's Yu also reacted with similar counter offers. The time limit for the temporary offers has since lapsed and it now appears that Safaricom has eventually embraced the price contest brought to their doorstep by Airtel. This week Safaricom began offering their new rates dubbed ‘Uwezo Tarrif of Kes. 3 (USD .038)per minute for on-net calls and Kes 4 (USD .050) per minute for off-net calls. They are also rewarding their more loyal post-pay customers with a flat rate of Kes 3.0 per minute regardless of the network - a rate identical to Airtels price structure. What is now more awakening for the price war pessimists is the fact that now Safaricom is mimicking Airtel in telling their customer that the new tariff is permanent and not an offer.

One might argue that Airtel has won its first battle - in cutting down the obscene revenues that Safaricom has been scooping from their voice business which has been its cash cow. Airtel might also argue out their advantage in that considering their network agnostic tariff structure, they remain the better option for the price sensitive, liberated voice consumers. Proponents of Safaricom’s tactics will easily argue that they have won this first battle after cautiously bringing down their tariff close to Airtel’s level - hence containing further erosion of their most valuable asset which is their subscriber base (about 78% of line subscriptions).

The winner is WE!
Whichever way you look at it, there is one clear winner of this battle - the consumer. The cost of voice communication has plummeted - about three times down. A few weeks back I argued in an article how Kenya's knowledge-based economy stands affected favourably by these new developments.  It is such a basic principle that it is hard to understand the psychology of those of us who were initially pessimistic about Airtel's bold move to pick up the ‘price war’ with Safaricom. Incidentally, from reader comments, there are those of us who still find it hard to drop their emotional attachments to the protagonists. Thus it remains hard for the people to start seeing themselves as the ultimate gainers.

Quite predictably, the war between Safaricom and Airtel in Kenya will be won a battle at a time. I shall propose that in all the battles, the winner will neither be Safaricom, nor Airtel. It will not be more peripheral players (Yu and Orange) either. The winner will continue to be WE the consumers!

Basic conclusion
The Swahili saying above may have situations of relevance in today's world dynamics. The saying however should not be loosely invoked in situations where market forces are in play. It is easily apparent that whatever platform the bulls (mobile network operators) will fight on, the consumer will be the ultimate beneficiary. In addition, to apportion credit where it is due, these benefits to the citizen will occur not by accident, but by the design of the Kenya Communications Act 1998 and its implementers (for example) in government. This and other legislations such as the Kenya Communucation (Ammendment) act 2009 have done much to create conducive environment for a vibrant ICT sector in Kenya. The environment is not perfect lest you get me wrong. But Dr. Bitange Ndemo and others are still working hard to continually improve the operating environment - Check out the www.information.go.ke site for more legislative efforts in the pipeline.

Tribulations of the M-PESA Agent

M-PESA is the mobile money transfer platform introduced in Kenya by Safaricom - Kenya's arguably dominant mobile network operator. It is a fact that M-PESA has revolutionized lifestyles of Kenyans in the last three years. To-date there are about 20,000 M-PESA agents in Kenya according to statistics from Safaricom. It is the extensive network of M-PESA outlets that Michael Joseph - former CEO of Safaricom attributes to the phenomenal success of the M-PESA money transfer system (see my notes on ‘reflections with MJ’ in October 2010). Although the former CEO's assertion remains arguable, the significance of the agents and their outlets cannot be overstated in analyzing the money transfer system's success.

Recently I engaged a couple of M-PESA agents in some discourse to try and understand their contribution to the platform's success. Perhaps it is because of our age old tendency to complain over everything that I caught a few concerns that would qualify to be the 'Miseries of the M-PESA agent'. Here are some :-

1. SMS trickery
M-PESA in Kenya is revolves around SMS texts exchanged between individuals, agents and suppliers as 'promissory notes'. The promissory notes  in form of text messages are guaranteed by M-PESA agents deposits with Safaricom (also known as float) through a trust deed (read more on this and an early 2009 systems audit report). With the maturity of M-PESA as part and parcel of our society, even the fraudsters have jumped on board to make their contribution in the diverse society. Agents have in the recent months fallen prey to these 'cleverer' citizens who send fake system withdrawal messages at outlets. Unsuspecting attendants failing to scan the entire SMS message for authenticity dish out money only to discover the trickery when the fraudsters has  vanished.

For readers wondering just how that can happen see an earlier post on this blog of a 'transcript' detailing a real example of such an incident. Of greater concern to the agent is the fact that their contract with Safaricom pushes liability for such losses to the hapless agent.

It might be easy to say that the amounts stolen by the fraudsters using this method is little and theoretically limited to Ksh.35,000 (Approx USD 440) per instance. However those who are privy to operational details of  small enterprises like M-PESA outlets might know that once an outlet is hit with theft of such an amount, it could take months to recover. A complete closure is also possible for such affected outlets.

2. Service Outages
Earlier in the week of  8th November 2010, Safaricom put out advertisement in traditional press and social media notifying M-PESA users of a scheduled downtime that would last most of the weekend from Saturday 13th 9pm to Monday 15th 6am. The scheduled outage would be due to a planned upgrade of the money transfer platform. A service outage for a whole day meant loss of a day's worth of revenue (commissions) by agents. The planned upgrade was later suspended on 11th November 2010, supposedly due to other unrelated outages of the Safaricom data network, that had to be brought under control first. I was curiously shocked to learn that Safaricom had a reason to bring down a service so critical to Kenya's economy for over 32 hours. For a moment then I thought service availability was not an important service quality metric to Safaricom. I defer my curiosity for now until they announce the new upgrade schedule.

Scheduled outages not withstanding, it is not rare for M-PESA agents to be found helpless by customers who cannot be served because 'the network is down'. The same is experienced by customers themselves from their phone when thet occasionally try to transfer money to others only to get a message that their transfer was not successful (to try again after ten minutes). Worse cases of service reliability affect M-PESA agents when a customer deposits money and there is a delay in the receiving the deposit confirmation text (on the customer's phone). The  agent is left in a precarious position of mistrust with an impatient customer who might not believe that their confirmation message will eventually come (perhaps after 20 minutes).

It is these planned and unplanned system outages (or degraded performance) that occasionally make the M-PESA agent a helpless businessman. Their supplier is also so powerful that they have no chance of negotiating favorable service level agreements to protect their small businesses from effects of such diminished service quality. Safaricom deserve a little more credit though. From the planned upgrade, it appears they have realized a need to improve the quality of their service (including increasing maximum transaction throughput from 70 to 200 transactions per second). Although the planned platform improvement might alleviate some of the recurrent outages, the little bargaining power of the agents will remain a matter of concern.

3. Employee theft
A blog post by @coldtusker sometime last year once attempted to highlight the culture of dishonesty among other costs of doing business in Kenya. Dishonesty can be argued to be prevalent among employees in Kenya.  Arguably, the desired combination of reliability and honesty among our workforce remains quite elusive. M-PESA attendants are not aliens to the purported culture of dishonesty. It should be correct to say that mobile money transfer systems include elaborate mandatory record keeping – some of which are electronically hosted by the money transfer platform. However many people forget that for as long as attendants must handle real money at some point, a temptation to steal or divert money meant for their outlet's operations exists.

Dishonest employees combined with an inept law enforcement system means that the M-PESA agent has to pray every day for their attendants not to yield to stealing temptations. The current police and justice system is such that it may be obvious who stole but nothing beyond knowing the thief is doable. It is this ever present fear of losing an outlet's cash that can permanently keep the M-PESA agent crossing their fingers. Some insurance companies I am told offer insurance cover against such losses but with 20,000 shillings 'excess' fees for any theft instance claimed. The insurance cover then rarely to makes sense to M-PESA agents since typically lost amounts are about the same as the 'excess'.

4. Fake Currency
A couple of weeks back I was listening in to one of our morning radio shows. Then there was this exasperated caller who was narrating how someone had deposited fake 20,000 shillings notes at their M-PESA outlet. The outlet's attendant had discovered the fake notes and alerted the local police before the conman had left. The police arrived at the scene, confiscated the fake notes, and left with the conman in 'custody'. To the astonishment of the agent, the police did nothing to assist agent who had already 'received' the fake deposit - hence deducted from their float. According to the caller, the conman eventually went scot free. With the current arrangement, no form of assistance was to be expected from Safaricom for mitigating such risks since the 'nonnegotiable' liability remains the agent's.

Long Conclusion
There are many other experiences that add up to bad ordeals for M-PESA agents ranging from general risks in the external environment to business risks directly related to the nature of outlets operations. It should not surprise many that the much touted 20,000+ M-PESA agents are really not having sustainable businesses. It might also be that the extensive network of agents is the single biggest success factor of Safaricom's M-PESA platform for money transfer. In that case, with the above sentiments of M-PESA agents, it is the same factor that Safaricom has not quite controlled to their favor. Some of the M-PESA agent's troubles appear to be way out of reach in Safaricom's external environment. It is however the same environment that an entity of their size and might could work with the government to influence – for their favor. Some of the mitigation measures are as basic as additional agent capacity building.

Incidentally, Telkom Kenya have recently launched their feature rich OrangeMoney platforms. Essar Communication's Yu is inducing M-PESA agents to become YuCash agents. Bharti Airtel is also sustaining their onslaught on Safaricom's dominance on various fronts including propping up its lower priced ZAP platform. The long term success of these competing mobile network operators in the money transfer market might just as well be pegged on how aptly they handle their value chain – including their dealers and agents.

All that said, I shall try not to contradict my earlier post on value proposition to Kenyans as the ultimate success factor and suggest that “The most significant success factor for mobile money transfer operators working in Kenya will be their value proposition to Kenyan stakeholders including their customers, agents, and shareholders”. In my opinion, patriotic sentiments and feel good aspects such as corporate social responsibility will take a back seat and value drivers (including market forces) will determine future growth paths for the competing mobile network operators.

Time to Comply with EMR Systems Standards and Guidelines in Kenya

A week ago I wrote about the then imminent launch of the Standards and Guidelines for electronic medical record systems in Kenya. The document was signed by both the Director of Medical Services (Dr. Francis M. Kimani) and the Director of Public Health and Sanitation (Dr. Shahnaz Kassam Shari). Another week has passed and the document has since been officially launched. It was the Director of Medical Services who launched the document on 3rd November at the Kenyatta International Conference Center on behalf of the Government of Kenya.

It has been argued that the existence of two Ministries of Health in Kenya has not been worked well for the country. However, it should be reassuring to note that the document is a product of collaborative efforts between the Ministry of Medical Services and the Ministry of Public Health and Sanitation. National AIDS and STI Control Program (NASCOP) which is placed in the Public Health and Sanitation Ministry was a key contributor to the document’s development. The Division of Health Information Systems (HIS) has been the leader of the effort as it pursues its vision to “Be a centre of excellence for quality health and health-related data and information for use by all.” For more on the division’s strategic plan see an older article I wrote in 2009. The Division of HIS is placed in the Ministry of Medical Services.

It is noteworthy that the EMR implementation initiatives have been driven largely by a need to run the country’s Anti-Retroviral Treatment (ART) programs more efficiently. Development of EMR systems has however grown beyond merely addressing ART programs.
The Division of HIS also envisions a country health care system with “EMR systems that support the provision of holistic health care while improving on health records management and contributing to improved quality of patient care.

It should be noteworthy therefore that the Division of HIS has taken the lead in championing implementation of EMR systems, not only for clinics with specific disease programs but also for an entire health facilities medical interactions.

In the previous post I highlighted some of the benefits of the standards and guidelines as well as some of the document’s weaker areas. A wide circulation of the document should in itself be a milestone for the government which is often accused of producing documents it fails to distribute widely for implementation and reference. In this post I shall rest at providing readers with a link to the actual document

Hopefully all stakeholders will start referring to it and complying appropriately - this is the line where I get to force relevance to this article’s title.