In 2010, when Airtel announced entry in the Uganda’s Telecom market, MTN sent their then Marketing Manager, Isaac Nsereko, to India on a fact finding mission. His role was to undertake a competitiveness analysis on Airtel – especially their unique way of doing business and how the market appreciated their products and services. Upon his return, MTN convened a meeting with all distributors at the former Ranch on the lake Hotel to discuss strategies for handling the new entrant.
As MTN prepared for Airtel, Warid was doing the same. Aware that Airtel competes on prices, Warid Telecom lowered prices in what later turned into price wars amid intense competitive rivalry. This culminated into the acquisition of Warid by Airtel and the ultimate changes in ownership at Orange telecom.
In a short period, there have been many changes in the telecom market. New players targeting the data market have emerged. The industry has undergone changes. The only constant in the market is MTN and their mobile money that continues to command leading market share.
Now there is a new threat, Africell.
However, the new entrant is a no bother to the current main players – MTN and Airtel. Reliable sources reveal that no preparation is being done to guard their market share. Are they right to ignore Africell? Below we explore what ails the company and how it could impact the market.
What ails Africell?
Africell is owned by Lebanese entrepreneurs (said to have deep pockets) with operations in four African Countries – Sierra Leone, The Gambia, Democratic Republic of Congo (DRC) and now Uganda. They are market leaders in Sierra Leone and The Gambia where they have won various awards for providing quality services. In Sierra Leone, they managed to displace Vodacom as #1, while in DRC are giving a hard time to Airtel and Vodacom. Like MTN, the company’s grand plan is being #1 in the markets they operate using their rich experience and financial muscle.
‘‘Our tremendous entrepreneurial energy emanating from every level of organization has made us #1 brand across all categories in The Gambia and Sierra Leone. This is propelling us to achieve similar positions in Uganda and DRC’’, reads part of the statement from the company’s website. It adds that “our streamlined organization structure allows us to seize opportunities. We are detailed to deploy our cumulative knowledge and experience so quickly to replicate our past.”
The big question remains – have the big boys tried to prepare for big small but deadly new entrant?
What strategies does Africell use?
Africell has kept her cards to the chest and no one knows the strategies they might employ in Uganda. Research done by this magazine reveals the fast growing telecom uses unconventional strategies. They attack where you least expect them.
In Sierra Leone, this fast growing telecom managed to gain market share from giant Vodacom, which later had to quit. Africell now command 68 percent of the market. In Gambia Africell commands 68 percent of market since 2006. The entry of two new firms has not affected them.
In DRC they launched in 2012 and are neck to neck with giants Airtel and Vodacom, with possibility of taking over the market any time soon. Reliable sources say Africell is good at ‘pressing the right buttons” to gain market share, even if it involves high level lobbying to influence the decision they want.
To gain quick market traction in DRC for example, they are said to have used some funny tactics which delivered results. According to sources, the company encouraged customers to exchange their existing SIM cards for an Africell SIM card and a kilo of sugar or posho. The old SIM card would then be cut into two pieces.
Would such a strategy work in Uganda? What about in the rural areas? Considering that some Ugandans, get overwhelmed with free things especially eats, it could be a perfect strategy. Just like many politicians, Africell seems to know where to touch, to get the numbers they need.
Africell also rides on low cost model to charge lower call rates. With over 700 masts across the country, Africell can easily achieve such strategy. All they need is to get numbers onto their network. However, we need to understand that Warid failed to win with the low cost model and they had to call it quit. We wait to see how they can lower prices amidst a competitive Ugandan telecom market.
UTL lose senior staff to Africell
Like those which came before it, Africell is said to be poaching senior staff from the existing players. The main culprit has been UTL, a company which most ambitious people see as stagnating, if not declining.
UTL’s Chief Commercial Officer Shailendra Naidu Somarouthu and Head of Sales are said to have already left for the greener pastures. Shailendra is the former CFO of Warid telecom. He is credited for having introduced a number of changes that saw Warid subscribers jump to over three million before it was sold to Airtel. He is expected to use his rich experience from Warid telecom.
Other analysts don’t see this as a cause for concern especially for the big players. “If those people have been at UTL and have failed to show any impact, what makes you think they can do magic with a new entrant with hardly any investment to talk about?” asked one analyst.
What next?
Telecom is usually a game of numbers and value added services.
If they really have the kind of money they are said to have, Africell must invest heavily in infrastructure, outlets, promotion and brand visibility.
Giving out freebies like sim cards and airtime may come in handy, but won’t bring the revenue needed. People who have money to spend on telecoms cannot easily be swayed by small freebies. To make an impact, Africell must invest in infrastructure and focus on the profitable segments like data and mobile money. How they will do this, no one knows. What we know is that there is always room at the top. The main challenge of the current major players is bureaucracy and poor customer retention strategies. All they need is 1m active data customers and the rest will be history.
Airtel is just trying to settle after years of trial and error. Attacking them at this time would be most felt. To make an impact, Africell must sustain lower rates for at least six to 12 months – the question is can they manage to do so? Keep in mind that Warid, which was also reported as being highly capitalized, failed on this strategy and they had to be bought.
Who is winning?
It is not a secret that when it comes to quality services and innovations, MTN is a mile ahead. Although they are perceived as expensive, MTN boasts of high average revenue per user (ARPU) and high retention. It is a network for business people.
Airtel’s recent net gains in terms of new subscribers are attributed to the perception that MTN is expensive. Unfortunately, these are low end subscribers, which MTN is not always concerned about as they want to increase profitability per mast instead of just having everyone on the network.
In the recent past, Orange’s new owners have kept a low profile until any pending cases are discharged. Just before new owners took over, former Orange employees took the company to court. Being a pre-acquisition development, the new owners decided to remain low. The success of Orange in the data business is a good sign that there are always some opportunities to tap even in mature markets like Uganda.
Should Africell come in with cost focus strategy, the main loser will be Airtel which seem to have many of folks who are price sensitive. The good thing with the Ugandan market is that they like to try new things. So, Africell will see some good numbers, but profitability should not be expected. Many Ugandans tend to keep their old numbers but also want to try new things. Some people switched long time to their old numbers 0772, 0773 and 0782 after Warid came and gone. Some still have their 0757, 0756, and 0758 which they use sometimes in case they want to make a ‘non-business’ call, as one industry analyst like to say. The other losers will be UTL, said to be currently burdened by debts and internal reorganizations that are never ending.
It’s even bad news for the new comers Smart and K2 telecom.
The winner is the customer. Welcome to a free market.
Twitter: @mkaketo
About the author
Moses Kaketo is the Editor and General Manager for Summit Business Review Magazine, holds a Master’s Degree in Business Administration from Uganda Management Institute, A professional diploma in marketing (CIM) and bachelors degree in Education. He sees business in everything. He loves writing business news, reviews and analyses.
Source: SBreview.net
