Safaric*m retains dominance despite dipping market share

Thursday, May 19th, 2022 06:53 | By
From left: Safaricom PLC chairman Nicholas Ng’ang’a, chief executive Peter Ndegwa and chief financial officer Sateesh Kamath chat after the announcement of Safaricom’s 2020/21 financial year results at the Michael Joseph Centre in Nairobi. Photo/PD/Alice Mburu

Safaricom’s dominance in the telco industry still remains unmatched despite its market share gradually dipping to 63.6 per cent over the past decade, underscoring how its huge network of investment, aggressive expansion and innovation has pushed competitors to the back burner.

The telco posted a 1.7 per cent drop in net profit to Sh67.49 billion for the year ending March 31, 2022, partly attributed to the intensive infrastructural investment in its Ethiopia subsidiary awaiting commercial launch this year.

“We are firmly on course towards our journey of transitioning into a purpose-led technology company by 2025 guided by our purpose of transforming lives,” Safaricom Chief Executive Peter Ndegwa said during the release of financial results.

The trail of the company’s grip on the Kenyan market is linked to its mobile money and reliable customer services, which have collectively sustained growth.

As of December 2021, Safaricom commanded 70.4 per cent voice traffic, 37 per cent fixed data customers, and 42 million total subscribers, equivalent to 79 percent of the country’s population.

Competitors like Airtel and Telkom Kenya continue to accuse the telco for dominance, claiming it is hurting other players in the sector with led to the picking of audit firm Analysys Mason to undertake a telecommunication competition market study between May 2016 and May 2017.

The report’s verdict ,first made public in 2018, would later raise critical concerns such as interoperability among mobile operators, mobile voice, data and mobile money services with key issues being suggestions to split Safaricom’s M-Pesa as a standalone business entity following an open uproar by rival Airtel Kenya.

Industry revenues

Under the Kenya Information Communications Act, 1998, a firm becomes dominant if it controls more than 25 per cent of the industry revenues or significant market control that places it at a vantage position. “Safaricom has always been at the forefront of looking for what is the future. Investments they made in terrestrial cable as much as it was expensive then, now it benefits because it controls a lot of that value chain, controlling prices, and service experience,” says Mbugua Njihia, a telecommunication expert.

With 97 per cent of the population coverage using the 4G network, Safaricom is now targetting offices and homes with high-speed 5G internet as it seeks to exploit the huge technology penetration, especially among youths. It handled 2.4 million new 4G devices in the latest financial year.

Business enterprises

The move is part of plans to tighten its hold on the data and digital business enterprises, mainly in cyber security and the Internet of Things (IoT), a revenue diversification strategy to offset diminishing profits in voice calls. Voice calls revenue surged marginally by 0.8 per cent to Sh83.2 billion.

Its revenues from mobile data surged by 8.1 per cent to Sh48.4 billion in the year ending March 2022 while M-Pesa earnings went up by 30.3 percent to Sh107.7 billion from Sh82.6 billion in 2021, forcing the telco to build its sustainability around the two areas.

Safaricom’s has on-boarded distributors, secured four retail shop locations and set up the first outsourced call centre in Addis Ababa, in addition to building two data centres and securing approvals for tower development. There have been claims to split the Nairobi Securities Exchange (NSE) listed telco since it also plays a critical role in the financial sector with M-Pesa.

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