Safaricom/

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CASE STUDY

case study / patagonianews / quarterly round-up

transformative telco

case study / safaricom /

In Kenya if you want to transfer money you don’t need to rely on your bank. If you want medical advice, you don’t need to visit the doctor’s clinic. And if you want to light your home you don’t need to find an energy supplier. Instead, Kenyans can call on telecommunications company Safaricom. Not only the nation’s biggest telco, but also its biggest company by market value, Safaricom is devoting itself to building services that improve the lives of the 19 million Kenyans it counts as its customers /

By Chloe MArKowICz

BrANd dNA FouNded / 2000

hQ / Nairobi, Kenya

StoreS / 36

eMployeeS / 2,660

produCt / Mobile telecommunication services: voice, messaging, data and fixed broadband

MISSIoN / transform lives

why CoNtAGIouS / rooted in Kenyan culture, it has created mobile-powered services that improve people’s quality of life in areas such as health, medicine and energy provision

CASe Study

Safaricom / TranSformaTive Telco /

Bob Collymore, Safaricom

'Our success is not measured by the profits we make but by the difference

we make.’

48 / 49contagious

case study / safaricom /

For Kenyans, the mobile phone is such a lifeline that some will forgo buying soap or sustenance so that they can add credit to their handsets. A 2012 study by iHub Research and Research Solutions Africa found that 20% of Kenyans earning under $2.50 a day were ready to make real sac-rifices, including going without food, so they could buy airtime.

while few people own a laptop in Sub-Saharan Africa, cell-phone ownership has been rising dramatically. According to global mobile association GSMA, it has climbed from just 1% in 2000 to 54% in 2012. what’s more, The Economist reported last year that there are 74 mobiles for every 100 Kenyans, compared with the African average of 65. Mobile technology provides a source of economic and social empowerment for Kenyans, and no company understands this better than local telco Safaricom.

SERVICING CUSTOMERS / Safaricom has developed services based around the mobile phone, including payments platform M-peSA, that have had a radical effect on Kenyan society. ‘Safaricom is the catalyst that has transformed the country at grassroots level,’ says Gaurav Singh, who was general manager of Safaricom’s digital marketing agency Squad digital before becoming chief digital officer of Scangroup, which owns the agency. ‘Although it started as a telecommunications company, it is providing services to each and every sector.’

Price wars / Safaricom’s services help the company differ-entiate itself within the competitive telecoms market. ‘to a certain point all mobile phone companies are essentially the same in terms of coverage and technology,’ says Safaricom Ceo Bob Collymore. ‘So, where do you compete? well, the only place left to compete is price.’

yet Safaricom is hesitant to be dragged into a price war, even charging customers up to 30-40% more than its com-petitors Airtel, essar and orange. Safaricom had launched its mobile payment system M-peSA (pesa is Swahili for money) back in 2007, but it was only when Indian-owned Airtel entered the African market in June 2010 that Safa-ricom felt pushed to focus more on services. ‘Airtel bought out 16 African telco companies and had the largest pan-African presence in the market,’ says Singh. ‘everyone knew that they had deep pockets and were going to fight on price. So instead of [doing] that, we added more layers of value on top of our products.’

Safaricom is the catalyst that has transformed the country at grassroots level. Although it started as a telecommunication company, it is providing services to each and every sector. Gaurav Singh, Scangroup

contagious 50 / 51

UNDERSTANDING KENYANS / As a local company, Safaricom is perhaps better placed to understand the Kenyan customer than its foreign com-petitors. M-peSA, for example, became successful in part because the service answered an unmet local need, provid-ing financial services to Kenyans who do not have access to a bank account. last year the service, which enables cus-tomers to use mobile airtime to transfer money to relatives or even pay bills, accounted for nearly a third of the company’s profits.

‘Because our staff [of around 2,660 people] is almost 100% Kenyan we understand how Kenyans think and behave and what motivates them,’ says Collymore, even though he himself isn’t Kenyan. A native of Guyana, Col-lymore was educated in the uK and previously worked for British telecom and for Vodafone in the uK and Japan.

Local identity / the company was founded as part of the state-owned Kenya posts & telecommunications Corp. It was incorporated in 1997 and then began its commercial operations as Safaricom in 2000. while uK telco giant Vodafone has a 40% stake in the company (alongside the Kenyan government’s 35% stake) Collymore says that since Safaricom is a Vodafone affiliate, not a subsidiary, it enables the company to retain its Kenyan identity.

Collymore contrasts this with Safaricom’s competi-tors who all have foreign parentage: France télécom owns orange, India’s Bharti owns Airtel, while essar is owned by Indian company essar telecom. ‘they are tempted to take what’s worked in other markets and try to bring it here,’ says Collymore. the Ceo explains that Safaricom is instead focused squarely on the needs of Kenyans, in particular low-income citizens. Safaricom’s services are therefore based more around ‘life and livelihood, versus lifestyle’, says Singh.

MOBILE MONEY /

M-PESA / M-peSA has been successful because so many Africans live in rural areas and have limited access to banks (in 2009 the world Bank reported that 70% of people were unbanked or underbanked). to transfer money via M-peSA, Safaricom customers do not need a bank account, bank card, or smartphone. Instead they purchase electronic funds via one of the 55,000 M-peSA agents across the country. the recipient can then retrieve the money in cash from an M-peSA agent near them. users can withdraw, deposit, or send between 50 Kenyan shillings (KeS) ($0.58) and KeS70,000 ($807) per transaction.

M-peSA has more than 15.2 million active users in Kenya (the country has a population of 41 million) and sees around KeS80bn a month ($922m) transferred between accounts, which represents more than 30% of Kenyan Gdp. windsor holden, research director at uK-based research firm Juniper research, says that while M-peSA has many would-be imita-tors, it flourished in Kenya for two key reasons: ‘Firstly, due to Safaricom’s pre-eminence within the marketplace; second, what has been referred to as a regulatory attitude of “benign neglect”. Many mobile network operators have found finan-cial regulators far less amenable when it has come to the establishment of a mobile payments service.’

case study / safaricom /

Mobile saving and loans / Building on the success of M-peSA, in November 2012 Safaricom launched a service enabling its customers to save money and apply for loans using their mobiles. the M-Shwari service was created in collaboration with the Commercial Bank of Africa. despite legal accusations (vehemently rejected by Safaricom) that the service breaches the intellectual property rights of micro-finance institution Faulu Kenya, Safaricom customers have embraced the service. So far M-Shwari has accumulated more than one million registered users and deposits of nearly KeS1bn ($11.6m).

M-Shwari encourages a culture of microsaving as it allows customers to deposit as little as KeS1 ($0.01). to be eligible for an M-Shwari loan, which can be as much as KeS100,000 ($1,160), users must be a Safaricom customer, have used M-peSA for at least six months, and have depos-ited money into their M-Shwari accounts. Customers get a 7.5% interest rate and must pay back their loans in full after one month, rather than in instalments.

TRANSFORMING LIVES /

Mobile solar power / Collymore claims that M-peSA wasn’t set up to make money but to ‘transform lives’ and that has been Safaricom’s mission. In the energy sector, Safaricom has helped improve the lives of its low-income customer base by making solar power not just accessible but affordable. It partnered with mobile-tech company M-KopA (whose founders and senior management worked on M-peSA) to create a pay-as-you-go solar power service powered by M-peSA; this is a useful invention for a country where 70 to 80% of the population has no access to the electricity grid.

the system works via a solar panel on the roof that con-nects to a control box in the customer’s house and can charge a phone and power three light bulbs. users pay on an instalment basis and can monitor their remaining credit through their phones. Safaricom is able to help customers at the bottom of the economic pyramid because it is familiar with how these people live day to day. ‘we understand the need for a child to have light at night so they can do their homework,’ says Collymore. ‘we understand the need to charge a mobile phone. the only way to charge a phone in much of Kenya is to pay someone KeS10 ($0.12).’

Services such as M-KopA can help Safaricom remain relevant in a market that is approaching saturation. ‘Safari-com’s key challenge is to sustain or enhance Arpu [average revenue per user] in the face of a costs base which will con-tinue to rise,’ says windsor holden of Juniper research. ‘It has thus far been noticeably successful in this regard thanks to the expansion of M-peSA into a range of related areas, together with the launch of services such as m-health and e-learning.’

Simon Andrews, founder of london-based mobile agency addictive, suggests that western telcos can learn from Safa-ricom’s model. ‘Safaricom saw a consumer problem that needed fixing – people found it hard to get money back to their family,’ he says. ‘they realised they could solve one of their business problems – customer acquisition and churn – if they helped people move money around. western telecoms need to take the same approach and be customer-centric, understanding what their problems are and solving them.’

M-HEALTH / If Safaricom’s mission is to transform lives it would be foolish not to consider what the company can do to improve health-

care in the region. Safaricom is not the only African telco to realise what a powerful tool the mobile phone can be within the healthcare sector. the patient to doctor ratio in Kenya is about 10,000 to one; with most doctors living in urban centres, the 30 million Kenyans living in the countryside have little or no access to medical facilities. however, almost every adult (70% of the population) has a mobile.

to provide customers with better access to medical advice, Safaricom created mobile health tool daktari 1525 (daktari is Swahili for doctor). the telco teamed up with medical advice hotline Call-a-doc to enable their customers to receive medical advice by calling 1525 on their handsets. the calls are subsidised by Safari-com and cost KeS10 a minute to cover the doctors’ fees. In its first four months the service received 80,000 calls, amounting to 703 calls a day. daktari 1525 won the purpose award at the Most Contagious event in london in december 2012.

GIVING BACK / Services like daktari 1525 and M-KopA help build the com-pany’s reputation as caring about the community. ‘It’s not that I want to be here as a philanthropist,’ says Collymore, ‘but the mobile is a really powerful piece of technology, so how can we use it to improve society?’

Charitable initiatives are in fact a major facet of Safaricom’s public image and an important tool in its commu-nications arsenal. ‘we know that we are charging a premium, but at the same time we are standing up for the causes that are at the heart of each and every thing that happens in our customers’ daily lives,’ explains Scangroup’s Singh. ‘our charitable work keeps the focus away from cost and towards what we are doing for society at large.’

Safaricom’s corporate responsibility endeavours are anchored by both the Safaricom Foundation and the M-peSA Foundation. ‘we work in health, education, environmental conservation, economic empowerment, disaster response, and do water projects,’ says Sanda ojiambo, Safaricom head of Corporate responsibility.

Number of M-Shwari registered users

Cellphone ownership in Sub-Saharan Africa

in 2012, up from 1% in 2000

1 million

54%

Western telecoms need to take the same approach and be customer-centric, understanding what [consumers’] problems are and solving them. Simon Andrews, addictive

Monthly amount transferred via

M-PESA

$922m

contagious 52 / 53

'The mobile is a really powerful piece of

technology, so how can we use it to improve

society?.’Bob Collymore, Safaricom

We know we are charging a premium but at the same time we are standing up for the causes that are at the heart of each and every thing that happens in our customers’ daily lives. Gaurav Singh, Scangroup

case study / patagonia

frictionless voting

Positive shopping experience

'not business as usual'

36 stores nation-wide

case study /safaricom /

Digitising Kenya’s elections ahead of Kenya’s elections in march, Safaricom worked with the country’s electoral commission to develop technology to make the voting process more frictionless. Safaricom created an app that informed voters of their nearest polling station and an online platform to help simplify registration.as contagious went to press the upcoming elections presented a real threat to Kenya’s stability and there were fears that the violence of 2008 would be repeated. The government announced it would be monitoring social media for abusive or threatening language. anyone found inciting violence or using hateful language on facebook or Twitter could face up to three years in prison. ‘There’s a lot of attention on the elections,’ says victoria Kaigai, Safaricom head of corporate communications and Pr. ‘it’s not business as usual.’

safaricom’s retail structure most people’s first engagement with Safaricom is at one of the brand’s 36 stores nationwide. Safaricom has invested heavily in building good experiences at its retail outlets, ensuring that the stores are colourful and airy. ‘in africa we have a very oral culture. We’re not like in europe where people are happy to do everything online only,’ explains Kaigai. ‘People still want to walk into a Safaricom Shop, they want to call customer care and talk to someone.’in addition to the Shops that sell handsets, laptops, and accessories, Safaricom has 400 stores run by authorised dealers that exclusively sell low-cost handsets and Safaricom airtime. across the country Safaricom also has around 250,000 retailers that mainly sell airtime in smaller denominations.

contagious 54 / 55

Kenyans for Kenya / one of Safaricom’s most success-ful CSr campaigns encouraged Kenyans to use the telco’s mobile payment system to help their fellow citizens. In July 2011 a drought in northern Kenya caused the country’s worst famine in six decades. Safaricom partnered with the bank KCB Foundation and media owners on a campaign that used M-peSA to help the red Cross raise funds for food and medical aid.

the campaign saw close to 650,000 Kenyans donating through M-peSA, raised KeS677m ($8m) and generated KeS216m ($2.5m) in free publicity.

Bring Zack Back Home / last year Safaricom again used M-peSA as a fundraising tool, this time to help raise money for a spinal injury rehabilitation centre. though spinal injuries are increasingly common in Kenya as a result of road acci-dents or shootings, there is no proper rehabilitation centre in the country, with the closest one being in Cape town, South Africa.

to raise the necessary KeS250m ($3m), zackary Kimotho, backed by Safaricom and the Kenya paraple-gic organization, vowed to travel the 4,000 kilometres from Nairobi to Cape town in his wheelchair. once an up-and-coming veterinarian, Kimotho was paralysed as a result of an attempted carjack-ing attack in 2004.

Supporters could follow his progress via a tracker on the Bring zack Back home website, watch videos of Kimo-tho telling his story and engage with content on twitter and Facebook. Braving extreme weather conditions and aggres-sive drivers, Kimotho returned home after travelling 115 kilometres. the first phase of the campaign ended when the fundraising license ran out and, while it’s unclear when the second phase of the campaign can start, Kimotho was able to raise KeS73m ($839,566) in 60 days, enough to pur-chase the land for the new rehabilitation centre.

Speaking out about road safety / Safaricom’s current CSr focus is a three-year programme to improve road safety, since more than 3,000 Kenyans die in road accidents each year. through the toa Sauti (‘speak out’) initiative, Safaricom has come together with government agencies, the police, and private companies, to help make Kenyan roads safer and discourage dangerous behavior, such as calling or texting while driving.

the programme encourages people to report accidents and hazardous drivers or commend good driving by dialing *700#. they can also report dangerous areas on the road by adding them to a Google map on the toa Sauti website and social network sites. ‘we’re looking at it as a way of empow-ering people to correct bad behaviour,’ says Victoria Kaigai, Safaricom’s head of Corporate Communications and pr.

DIGITAL COMMUNICATIONS / Safaricom is highly active on social media. this represents a big change from a few years ago when Safaricom’s digital strategy revolved around pushing people to its online prop-erties through online ads, rather than via content platforms, says Singh of Scangroup.

‘About 10 million Kenyans go online, that’s one out of every four Kenyans,’ says Kaigai. Safaricom is the most pop-ular Kenyan brand on Facebook (with more than 224,000 fans), has more than 88,630 followers on twitter, and is active on Google+ and youtube.

According to a McKinsey survey, social networking is the most popular online activity for Africans and 57% of inter-net users reported that they used social networking sites ‘often’. Kenyans are particularly heavy users of social media. In Kenya, Singh says, there are two million active Facebook users and Kenyans spend about eight hours a week on social networks, compared with a global average of eight hours a month. It is therefore an obvious choice for Safari-com to engage on social media, particularly when reaching out to younger customers.

Safaricom relies on its long-running events to help pop-ulate its social media content. these include the running

wild Marathon, Niko Na live – a music road show featuring Kenyan artists – and the Safari-com Sevens rugby tournament. ‘these events reinforce our position as a truly Kenyan com-pany,’ says Kaigai. the events

help create cachet for the brand amongst the youth, both at the live events and through its digital assets.

Transparency / while Safaricom understands the impact of social media in communicating en masse to its customers, it is only now coming to grips with the challenges involved. ‘you can’t hide anything when it comes to social media,’ says Kaigai. Speaking about the wrath that Safaricom faced from its young consumers when it withdrew unlimited data bundles, she adds: ‘Social media has allowed us to talk to people we wouldn’t have talked to before. But we’ve also got the venom of people who maybe wouldn’t have reached us before.’

‘we can’t simply rely on conventional media to get our message across,’ says Safaricom Ceo Collymore, who has almost 95,000 twitter followers. ‘we now have to get involved in a conversation with people.’

FUTURE GOALS /

Making a difference / In 2012 Safaricom’s total revenue rose 13% to KeS107bn ($1.24bn) and its customer base grew 11% to 19.1 million, but Ceo Collymore is loath to gloat about financial accomplishments. ‘our success is not measured by the profits we make, but by the difference we make,’ he says. his goal is for Safaricom to remain relevant to Kenyan society and provide an example of corporate lead-ership as a company that can transform people’s lives. ‘we don’t set out to be the cheapest network in Kenya. we do however set out to be the network that makes the biggest difference. we still have 65% or so of the market despite being more expensive than our competitors and the reason for that is the transformative effect that we set out to have. I think Kenyans know that we’re in this together.’

225,000

Number of Kenyans who go online

10 million

I think Kenyans know that we’re in this together.Bob Collymore, Safaricom

Number of Safaricom’s Facebook fans

Time spent per week by Kenyans on social networks. The global average is eight hours a month

8 hours

contagious

analyst insight / safaricom / By danson Njue, Informa /

analystinsight

Safaricom represents africa’s success story of a local mobile telecom that, against all odds, has become a leading converged services provider. its passion for innovation and service delivery has seen it grow its mobile subscriptions to more than 19 million, maintaining the market lead. Kenya’s telecom industry regulator reports over 29 million mobile phone users, with Safaricom representing more than 60% of the total. Safaricom’s secret to maintaining and attracting customers lies in great customer service and the introduction of new products and services. m-PeSa, a mobile money transfer service, has provided Safaricom with the perfect tool to attract and retain customers. its advanced 3G+ network offers a great data experience to its customers when compared with its competitors. However, increased competition as a result of the 2010 price wars is challenging Safaricom’s position as the market leader. Deteriorating quality of services (QoS) also threaten Safaricom’s position. The latest reports by the industry regulator listed Safaricom as the worst operator in 2012 in terms of QoS. To counter this, Safaricom has adopted various measures including a reduction in its operating expenditure as well as an undertaking to expand its network and improve quality. according to research firm ipsos, Safaricom reduced total ad-spend from KeS3.1bn ($35m) in 2011 to KeS1.6bn ($20m) in 2012. Despite this, Safaricom is still ahead of its competitors in terms of the amount of advertising spend. Safaricom has adopted various strategies in response to pressure from competitors. By evolving m-PeSa into an integrated mobile finance service that is being bundled with other services, such as bill payments, Safaricom continues to improve its customer loyalty. This has enabled the company to greatly reduce overall churn rates; Safaricom recorded a churn rate of 27.9% in the financial year ending 31 march 2012, compared with 30.8% the previous year. m-Shwari, Safaricom’s mobile saving and loans service, has recorded great success, registering about 20 new users per minute, and surpassed KeS1bn ($11.5m) in transactions one month after its launch. Safaricom also plans to launch an app-store to tap into the local app market, which will enable it to launch relevant content to its customers. it is also involved in massive network upgrades, especially to rural un-served and under-served areas, to increase its subscriber numbers and subsequently boost its market share. Safaricom's future looks very promising. competition in the data market is expected to intensify and Safaricom stands in a better position when compared to its rivals.

Danson njue / research analyst / informa Telecoms & media, nairobiwww.informa.com

56 / 57

Photo / S

ven Torfinn

case study / safaricom /

BrANd MAp / SAFArICoM

ChAlleNGe / SolutIoNS /

Payment protect market share amidst competition from an aggressive new entrant.

Maintain high price position and increase average revenue per user (Arpu).

use brand equity to connect to Kenyans.

reduce churn by investing in services. Safaricom’s mobile payment system M-peSA has dramatically altered the lives of unbanked Kenyans, making it possible for them to send and receive money using just their phones. the new M-Shwari service builds on M-peSA’s success by allowing users to save and borrow micro-sums.

Although Safaricom’s target consumers are at the bottom of the economic pyramid, the company prefers to charge up to 30-40% more than its competitors rather than get dragged into a price war.

Price

social media

when it comes to digital communications Safaricom is active on a host of social media networks including Facebook, twitter, youtube, Google+ and Instagram. the brand’s social media strategy involves populating its online assets with content from its events, including the running wild Marathon, the Safaricom Sevens rugby tournament, and the Niko Na live music road show.

Value-added services in other sectors from M-KopA, which offers affordable solar power, to daktari 1525, a medical advice hotline that reaches out to Kenyans who do not have access to a doctor, help build loyalty amongst Safaricom customers. these vital services, available only to customers, justify the premium price point.

services PartnershiPs

whether it comes to its services or charity initiatives, the company relies heavily on smart collaborations with appropriate partners. M-Shwari, for example, was made possible through a partnership with the Commercial Bank of Africa, while daktari 1525 was developed through a partnership with medical phone service Call-a-doc.

the telco takes corporate social responsibility seriously. whether this is raising funds to help drought victims (Kenyans for Kenya) or building a paraplegic rehabilitation centre (Bring zack Back home), Safaricom is dedicated to bettering its community.

charity LET US JOIN HANDS AS KENYANS FOR ONLYKSH 1 A DAY AND SUPPORT THIS NOBLE CAUSE.

I, Zack, was injured 8 years ago through a gunshot incident and I have been confi ned to a wheel chair since then. I have embarked on a wheel chair journey to the nearest rehabilitation centre in South Africa. It costs Ksh 10M to rehabilitate a spinal injury patient. If we had our own rehabilitation center in Kenya, fellow Kenyans would not have to struggle to raise money to seek rehabilitation away from home and family. I am doing this to get your contribution to raise Ksh 250 Million in 60 days for the construction of a similar facility here in Kenya. I am now in Isinya, please do not let me get to the Kenyan border.

Br ingZackBackHome.co.ke

Donation period between June 9 and August 7, 2012.

BRINGZACKBACKHOME

Advertising Space Donated by The Star

Our success is not measured by the profits we make, but by the difference we make. We don’t set out to be the cheapest network in Kenya. We do however set out to be the network that makes the biggest difference. We still have 65% or so of the market despite being more expensive than our com-petitors and the reason for that is the transformative effect that we set out to have. I think Kenyans know that we’re in this together.

Bob Collymore, Safaricom

contagious 58 / 59

BrANd MAp / SAFArICoM

tAKeoutS /reSultS /

place livelihood over lifestyle. where public services might exist but don’t, explore the potential of delivering branded solutions.

understand your customer and use the power of local insight. Consider their day-to-day challenges and how your brand can improve their lives.

Value partnerships. By teaming up with the right collaborators, Safaricom was able to expand into new revenue areas outside the telecommunications industry.

Build services. useful services can extend a brand’s offering, create differentiation in a crowded market, and help maintain price point.

19.1 million the number of Safaricom mobile subscriptions

39,400 the number of M-peSA agent outlets. M-peSA has

14.9 million customers, 900 paybill partners and 300 bulk payment partners

67% Safaricom’s market share

Safaricom’s total revenue, up 13% for the year ending March 2012

The number of devices that

Safaricom sold in the year ending

March 2012

KES107.00bn ($1.24bn)

Because our staff are almost 100% Kenyan we understand how Kenyans think and behave and what motivates them.

Bob Collymore, Safaricom

2.98 million

Growth in M-peSA’s registered customers

for the year ending March 2012

6%

KES16.87bn ($193.9m)

M-peSA revenue for the year ending March 2012