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Is K2 Telecom on Life Support? Why the Telecom May Soon Close Shop.

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K2 telecom

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By Moses Kaketo

Think about it, if you were given Ugx 10 billion today, what would you do with it? Become a multi-millionaire in a matter of time? Well, you could fail as well.

The launch of K2 telecom promised a new era. Being attached to the Buganda Kingdom, with over eight (8) million Baganda, there was no reason for failing to penetrate the market instantly.

To break-even, a telecom in Uganda needs just one million active users on voice. K2 telecom’s customer acquisition target was just that. A feat that was easy to attain within just the first year.

The telecom was launched on 31st December 2012 by Kabaka Ronald Muwenda Mutebi at the Kingdom’s annual end of the year event-Enkuka. In attendance were thousands of loyal Buganda Kingdom subjects, friends and well-wishers. It was a perfect moment and a huge endorsement boost to the new telecom by the Kingdom.

Three years later, the network is slowly disappearing. The network’s silence is too loud for folks that follow the telecom industry keenly.

K2 operates as Mobile Virtual Network Operator (MVNO). It depends on other networks to deliver telecom services. This kind of license or business model significantly constrains the operator, as they have to cede a huge chunk of their revenues to the partnering telecom. It is like an insurance company paying over 80% of their collected premiums to a re-insure.

Independent information indicates that K2 telecom is struggling due to cash flow challenges. Market reports show the company has just 200,000 customers, which is below the one million needed to break-even in this highly competitive market. The company’s woes stem from Airtel’s concerted efforts to create partnerships with the Buganda Kingdom; which has seen the company associate more with the Kingdom than K2. Thanks to more value addition by Airtel compared to K2, the latter has not registered many subscribers as anticipated.

Even then, K2’s 200,000 subscribers are not all active. Over 100,000 – that is a 50% of all subscribers, are said to be dormant – have not made calls in the last 90 days. This, coupled with higher churn rates, makes the business difficult. All efforts to recover clients using consistent on the powerful kingdom radio CBS 88.8 have been futile. The challenge has been that most distributors and retailers are not restocking K2 products, as they are not fast moving, which means low returns for the distributors.

With slow business for K2 products and services, many of the agents the network had recruited have closed shop, as they do not have sufficient monthly revenues to meet rentals and other running costs. The few that our reporter talked too, disclosed were in the process of closing shop, unless K2 is able to support them so as to remain open – something that is unlikely to happen considering such a model does not exist in telecom distribution, and K2 is also financially squeezed.

During market research for this article, we visited a number of towns within Buganda. Unfortunately, in this region where the network’s focus would be, neither agents nor products were visible. Findings from the field reveal that K2 distribution sales points in Kireka, Luwero, Wobulenzi, Bweyogerere, Mukono, and Mityana have since closed down.

In Masaka, while K2 telecom shop remains open, ‘‘business is too slow’’, according to a shop attendant who preferred to remain anonymous. On the other hand, MTN and Airtel shops next to the K2 outlet where very busy throughout the time of the visit.

Dead social media

Despite having 9,832 Facebook likes, the network’s page was last updated on 2nd February 2015. Enquires from existing and potential customers have been ignored. On December 27th 2014 Jafia Shacool, K2 customer posted on network’s Page: ‘‘Why don’t you have customer care on your page?”. It is nine months later; his complaint still remains unattended to.

How K2 lost it

Largely, a 21st century phenomenon, MVNO’s have taken over the market especially in developed world. In some European countries, MVNO’s control between 10 and 40 percent of the market.

According to analysts, K2 had all it takes to survive and command reasonable market share in Uganda. But lack of clear strategy and understanding of how MVNO’s operates is failing the network. Based on extensive market research and experience working on a variety of MVNO, experts identify key success factors for MVNO’s which K2 could have missed. Successful MVNO’s often survive by identifying a niche market, use conventional business model to attract this market.

With an estimated nine million Baganda, by employing a clear set of aggressive segment marketing strategy and specific distribution tactics, K2 was destined for better future. If they had focused on tapping into this customer segment, by offering customized solutions, like Kingdom ringtones, and special culture education, it could have done some magic.

The same model could have been rolled to Bunyoro and Tooro, and the results could have been tremendous. Such a niche is so loyal.

Industry experts say, if K2 had clear strategy for the launch, everyone who attended the Enkuka –these are loyal Baganda, would have been given free Sim card or even better subsidized cheaper phones.

In just one day, the network would have had at least 100,000 people on her network. That would have been a great start. This was missed opportunity.

Operational excellence

According to research, 75 to 85 percent of MVNO cost structures involve variable charges like wholesale airtime costs and customer acquisitions expenses. Successful MVNO, need to minimize customer acquisition and retention costs. K2 got this wrong from day one.

To portray corporate image, K2 chose an upscale office on Clement Hill next to MTN and former Warid head offices. This pushed their fixed costs budget up to the roof.

Why didn’t they locate their head offices within Bulange?

They got to learn of this late and shifted to Katwe, Muganziwanza building, which is owned by the Buganda Kingdom.

Successful MVNO’s occasionally depend on their existing customers to take on certain aspects of their operators such as sales, customer service and marketing.

This in effect cuts down on costs. K2 chose to use same methods like other teleco’s. In return, these ‘agents’ or network’s users receive a remuneration in form of commission.

For example, one of the MVNO in the United Kingdom is estimated to have paid UK 3 million pounds to its customers for job well done. Therefore, company needed only 28 full time employees.

According to industry analysts, it’s not too late for K2. They can rebrand and re-launch at this year’s Enkuka.

About the author:

Moses Kaketo works with Summit Business Review Magazine, holds a Master’s Degree in Business Administration from Uganda Management Institute, A professional diploma in marketing (CIM) and bachelor’s degree in Education. He sees business in everything. He loves writing business news, reviews and analyses.

Twitter: @mkaketo

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StarTimes moves to empower youth at SOS Villages

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 Olive Lumonya (L) exchanges MOU with Andy Wang (M) as StarTimes PRO Christine Nagujja looks on.

Olive Lumonya (L) exchanges MOU with Andy Wang (M) as StarTimes PRO Christine Nagujja looks on.

By Our Reporter

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StarTimes has moved to empower youth at the SOS Children’s Village. The pay TV company on Wednesday signed a memorandum of understanding with SOS during an event held at the NGO’s national office in Entebbe.

The three-year partnership will see SOS children get internship and job placement for qualified youths from the village, provide digital television and equipment for learning to the SOS villages so that the children can go e-learning and match with the competitive job market. In addition, StarTimes will use its platform to spearhead a campaign to encourage Ugandans to offer support to children’s homes.

Speaking at the event, the CEO of StarTimes Andy Wang said that this partnership is one of the few ways they can give back to Ugandans for the great support they have showed StarTimes in the past 8 years that has turned them into the largest market share holder.

“We believe this partnership will help the youth reach their full potential and contribute positively towards the development of this country,” Andy Wang also noted.

Ms Olive Lumonya, the Country Director SOS Children’s Villages expressed gratitude towards the partnership noting that with this support will go a long way in providing a more comfortable environment for the children.

“With the biggest population at the SOS Children’s Villages being youth, we have been grappling with youth unemployment among other challenges. We are grateful that StarTimes has come on board to help us deal with this.” She said.

“It is a great honor to partner with StarTimes which has committed to support us as we strive to create a comfortable home for our kids.”

SOS Children’s Village have branches in Kakiri, Entebbe, Gulu and Fort portal where they cater for 680 children. They also support over 10,000 more children with in the community.

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UBA wins Social Banking award for LEO Chat banking

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The UBA Uganda team receiving the Social media award for the Leo- Chat banking Innovation

The UBA Uganda team receiving the Social media award for the Leo- Chat banking Innovation.

By Our Reporter

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UBA Uganda has received recognition for its ground breaking Innovation -LEO Chat banking. This was during the annual Digital Impact Awards Africa (DIAA) which were held at Kampala Serena Hotel recently.

The 2018 Digital Impact Awards (DIAA) themed “Include Everyone” recognized and rewarded individuals and organizations that continue to spearhead the use of digital tools to enhance financial and digital inclusion while leading to economic transformation, across Africa.

UBA Uganda flourished in the social banking category, where the bank was recognized for the innovation of the first banking chat bot in Uganda and the World. UBA’s chat bot LEO impressed the judges, for bringing banking services to the apps where consumers didn’t have these services.

“This award is for the teams that have worked so hard to bring LEO to life. We are grateful to the customers that voted for UBA. In line with our ‘Customer First’ philosophy, we shall continue using technology to innovate products and services that empower customers and make banking more convenient.” said Johnson Agoreyo, CEO UBA Uganda.

LEO enables customers perform ordinary banking transactions such as account opening, funds transfer and airtime purchase while providing access to customer service on social media sites such as Facebook and Whatsapp.

Congratulating UBA Uganda on the award, Emeke E. Iweriebor, CEO UBA East and Southern Africa said, “Technology has remained central to United Bank for Africa’s business strategy, as we continue to enhance our product offering beyond brick and mortar locations, deploying lifestyle banking technology, to serve our customers. This accolade, is therefore a testament of our pledge for excellence in line with our vision, to be the undisputed, leading and dominant financial services institution in Africa”.

With the increased demand of convenience by customers and the growth in the use of social media, LEO is a necessary and welcome innovation.

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dfcu Bank threatens legal action over “fake news campaign”

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DFCU bank

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By Our Reporter

After continuously being shown in bad light in sections of the media, dfcu Bank has warned it will take the legal course to seek reparations if the media attacks continue. In a legal notice that has surfaced online, the bank accuses Rajiv Ruparelia of orchestrating the smear campaign against its business over the last 10 months since they took over some of the assets and liabilities of Crane Bank.

Through its lawyers, Kalenge, Bwanika, Ssawa and Company Advocates (KBS), dfcu claims Rajiv “sponsored, coordinated and propagated a fake news campaign” through online news sites and blogs with a motive to cause a bank run and eventual collapse of the bank.

“You have variously paid the operators of online news sites and blogs to spread malicious falsehoods about our client and its senior management, all to create an impression that our client is in a precarious financial situation and an ownership and management crisis whereas this is not the case,” reads part of the letter dated 5th October.

“Once the malicious false hoods have been crafted into sensationalist online content you have been repeatedly sending web links to the sites carrying these falsehoods using social media particularly Whatsapp,” the letter further reads. “You have done this repeatedly and to a very large number of recipients with a view to driving traffic to the false stories you had paid for and in the hope that the links would go viral and cause maximum damage to the reputation of dfcu Bank.”

KBS also outed several online publications and bloggers whom they claim are Rajiv’s vessel for executing the fake news campaign, which they say amounts to corporate defamation and economic sabotage.

“Your repeated conduct amounts to the civil torts of corporate defamation and interference with our client’s business by unlawful means,” KBS notes. “Your repeated attempts to destabilize the second largest financial institution in Uganda also amount to economic sabotage and have national security implications.”

dfcu bank is demanding a written apology from Rajiv as well as restraint from engaging in this “nefarious and malicious” campaign or it will initiate criminal complaint and commence civil proceedings against him.

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