Archive for February, 2010|Monthly archive page

Of Zain, Bharti Airtel and Indian MNCs in Kenya

So MTC Kuwait, trading as Zain, is flipping its Africa operations to Bharti Airtel of India? If the deal goes through, and we shall know by March 25th, then the metamorphosis of Kenya’s second largest GSM mobile network, by subscriber base, will have undergone yet another momentous change.

Starting off as Kencell (jointly owned by Naushad Merali’s Sameer Group and Vivendi), part of the company was then sold by Vivendi Universal of France to Celtel BV, then promptly re-branded Celtel. That was in 2004. Celtel continued with many mistakes that Safaricom capitalised on. Dealers were unhappy, marketing and advertising did not touch the Kenyan soul (many of them were cut-n-paste pan-African ads which did little to “talk” to Kenyans), and a high employee turn over, especially at the executive level did not instill alot of confidence in the business. Interestingly, the most recognised CEO in Kenya is Michael Joseph of Safaricom, who has been at the helm since inception.

Almost a year later in 2005, MTC of Kuwait came knocking with some serious petro-dollars, a whole US$3.4bn and bought out Celtel International with all its network assets, including Celtel Kenya. The network later went on to be re-branded as Zain, in line with MTC’s international branding policy. The story has not ended yet, as we await March 25th when Bharti and MTC will emerge from the boardroom.

The journey has been long and arduous, as Zain’s number 1 nemesis and market leader, Safaricom, overcame teething problems in the early years to streak way ahead of the competition. Safaricom simply studied what the people wanted, capitalised on Zain’s simple mistakes, like charging a fee for any recharge voucher (since discontinued) and basically connecting with the ordinary Kenyan who was being introduced to mobile telephony, or any form of telephony for that matter, for the first time. Safaricom quickly cut an image of a “mwananchi” (citizen) conscious company, while Zain, then Kencell, was seen as elitist and playing to the corporate theatre. This was to set the battle field dynamics that played until the other two late entrants, yu, an Essar Telecom network, and Orange, a France Telecom network came in. Safaricom by then was light years ahead in terms of innovation, products (especially M-Pesa money transfer), mass subscriber base appeal, philanthrophy, network coverage etc.

It will be interesting to see how Bharti Airtel of India deals with the Zain brand, an early starter turned laggard. Bharti is no push over, it is India’s largest integrated telecom company in terms of customer base. They offer mobile services, fixed line services, broadband & IPTV, DTH, long distance and enterprise services. Globally, Bharti Airtel is the 3rd largest in-country mobile operator by subscriber base, behind China Mobile and China Unicom. In India, the company has a 24.6% share of the wireless services market, followed by 17.7% for Reliance Communications and 17.4% for Vodafone Essar (part owned by Essar Telecom, operating in Kenya as yu). Are the Indians coming?

Will Bharti start by re-branding Zain? Perhaps this time to Airtel (the brand they use in the largest GSM network in India?) How do they address subscriber apathy despite great tariffs, well built network, and competitive products e.g. Zap money transfer? How do they address the distribution chain?

We can only wait and see.