Focus now on Collymore’s last days in corner office

With one year to go at the helm of one of the region’s most valuable listed firms, Safaricom CEO is hard-pressed to leave a legacy of M-Pesa proportions. 

In the last two years, Safaricom has made new forays in entertainment streaming, online commerce, health services, transport, security and agriculture among other sectors.

This comes as the company seeks to reduce reliance on voice and SMS revenue that has since plateaued as more users adopt over the top services such as WhatsApp, Facebook among others.

Revenue from voice, which in 2016 fell to less than half of the company’s entire earnings, dropped further from 49 per cent to 44 per cent last year.

This has pressurised Kenya’s biggest telco search for the “next M-Pesa”, a service offering that will reach similar critical mass and chart the next growth phase in a digital ecosystem defined by increasing decentralisation of both hardware and software and platform-agnostic solutions.

Last year, Safaricom shareholders voted to extend CEO Bob Collymore’s contract by an additional two years. His term is now set to expire in August 2019.

With one year left to his mandate at the helm of one of the region’s most valuable listed company, Mr Collymore today finds himself hard-pressed to walk out of his predecessor’s shadow and leave a legacy of M-Pesa proportions.   

“We seek to diversify our company and right now, if you just want to be a mobile phone company, you are not going to go anywhere because customer needs are changing,” he told the Financial Standard during the company’s annual general meeting last month.

“When Michael Joseph was chief executive, if he had not invested in M-Pesa, we would be talking about a different story today. We want to focus on what the customer needs today and where they are taking that need over the next few years.”

Top on Collymore’s bets is Masoko, the online trading platform launched last year and which the company hopes will become a leading e-commerce service in the region in the mold of Alibaba and Amazon.

Kenya’s e-commerce industry has proven a tough nut to crack for service providers in the past.

Just this year, South African conglomerate Naspers shut down offices of OLX in Kenya and Nigeria.

Despite aggressive marketing and a strong brand identity in the Kenyan market, the platform was a drain on Naspers’ resources without forthcoming signs of profitability.

e-commerce site

This is the second time Naspers has closed down its e-commerce ventures in Kenya after the firm shuttered Kalahari in 2011 - just two years after launching it. Kalahari is considered Kenya’s first e-commerce site and was headed by Joseck Luminzu who had previously served as M-Pesa’s head of sales.

Safaricom’s foray into Masoko, even as platforms like Jumia and Uber Eats struggle to break even, has prompted questions on how long the company will subsidize the platform before shareholders start asking for returns on the investment.

Mr Collymore is however optimistic that the platform will succeed, conceding that some investments might take longer to gain traction.

“I don’t think we are spreading ourselves too thin,” said Collymore when asked if the company had exposed itself too much in its diversification drive.

“If we just relied on voice, text, and data, we would have a limited lifespan. M-Pesa took a long time before it finally got to a profitable level the board was pressing to have it bring.

“With some of them (new products), we will get a response in terms of numbers in 12 months while others will take a few years.”

Safaricom’s music streaming app Songa launched earlier this year is one such service that could take time to translate into revenues and match the clout M-Pesa or mobile data have had on the company’s balance sheet. The app has a 3.8 rating out of five on the Google Android store with reviews ranging from compliments on local content availability to complaints about a poor user interface. Earlier this month, Safaricom released new updates for Songa in a bid to fix problems experienced by users like crashing and poor playback on some devices.

The app is however not published on the iOS store, locking out iPhone users who form a big chunk of the online subscription market. Last month, the company cut the subscription fees by a drastic 80 per cent from Sh25 per day to Sh5 daily.

This is likely to lower earnings for artists who were banking on Songa as a revenue stream thus reducing the enthusiasm. Safaricom’s other forays, however, show optimism and a return on investment at least on the medium-term.

Digifarm, the company’s agribusiness venture is currently on a pilot run that has since seen more than Sh600 million invested in setting up farm depots across the country and registering farmers on a network to provide digital extension services.

Safaricom hopes that Digifarm will be the technological silver bullet to cut out middlemen who distort the pricing and eat into the share of revenue owed to smallholder farmers.

“We have not even launched Digifarm above the line and we have a million farmers signed up to our proposition which helps the farmer get access to financing, information and brings the buyer to the farmer,” he said. “We think it will make a whole lot of difference and we are aiming to have about 10 million farmers signed up.”

The region’s most profitable company now awaits the fate of deliberations in Parliament and the regulator Communications Authority of Kenya (CA) on whether it will be subjected to strict new legislation should it be found to have abused its dominant position.

This comes even as the firm fights a Sh449 million fine from the CA for disconnecting calls to a smaller rival, Elige Communications Ltd.

Last year, the regulator waived a similar fine after Safaricom experienced an hours-long downtime on its M-Pesa and 4G data network. In the last financial year, Safaricom paid out Sh270 million in fines for failing to meet the quality of service standards. 

With the company looking to enter the regional market with these new and other legacy products, the eyes of shareholders and investors will sharply be trained on Mr Collymore as he serves his last year in office.