Tuesday, March 20, 2018


They say there are four reasons to build a company -- to support a lifestyle, to live something for your children, to sell it and for philosophical reasons.

Each reason creates a different kind of company and may very well determine its longevity.
Last week former Kenya telecom company boss Michael Joseph was in town to talk about building a legacy.

While Safaricom, for which his name will be forever linked, is barely 18 years old, the impact it has had on the Kenyan economy and society, is such that it is not too soon to talk about legacy.

Safaricom, with a market capitalisation of about $12b as of the close of the NSE on Thursday, is currently the most valuable company on the Nairobi Stock Exchange (NSE), in Kenya and in the region.

It has a network of almost 30 million subscribers and its M-Pesa, mobile money platform also boasts a 25 million subscriber base. In addition Safaricom is a near monopoly in the region’s biggest economy commanding a 80 percent of the voice market.

So if Joseph, the founding boss of Safaricom has something to say about legacy he is hard to ignore.
They say you can only make sense of your life events, join the dots, looking backward. Joseph's life and career are testament to this....

A trained engineer, Joseph was born in South Africa, worked in the US and Europe, and at what would have been the evening of his career at 55 Joseph was shooed off to set up Safaricom in faraway Kenya.

With only $20m – the price of two mobile switching stations, he set about building Safaricom in 2000.

He thought London, home office of Vodafone which had gone into partnership with the Kenya government to start Safaricom, gave him less than a 50-50 chance of success. A situation which may have been discouraging but which played nicely to his advantage, allowing him to push through innovations without much interference.

He found existing players were pandering to the elite but he quickly made the decision that he wanted to build a business that catered to the matatu commuter. In that line Safaricom introduced per second billing, lower scratch card denominations and 24/7 customer care service centers.

The numbers jumped rapidly, breaking the million subscriber mark within three years. Caught by surprise by speed of growth and the bureaucracy of getting money for expansion from the shareholders, Safaricom quickly developed a reputation for less than ideal service.

They soon got over that debacle and went from strength to strength.

But what has set the apart and made the world leaders is the introduction of mobile money, under their M-Pesa brand. As Joseph tells it the software that kicked it off was a quick and ready solution that had been developed in Cambridge with funding from the UK government under a program to increase financial inclusion.

No one else wanted to try it out. But having lived in Kenya for almost decade, Joseph had an inkling how such a product would work in a mostly informal economy like Kenya.

In explaining why while the product has been widely successful in Kenya and has fallen flat in South Africa, Joseph said that for innovation to take hold it helps if it is championed by the top leadership in the company.

They spent $10m on promoting M-Pesa in the first year and if it had fallen flat he wouldn’t have been in Kampala to share his story last week.

And the rest is history. Last year total transactions off the Mpesa platform came in at Kshs 6.87 trillion or about the size of Kenya’s $70b economy...

The company has gone on to launch a host of services – data, micro loans and insurance, its growth seemingly not about to run out of steam.

Joseph who by his own admission is hard task master, eventually stepped down from the helm of Safaricom in 2010. His thinking was that as the company had grown and become more bureaucratic it needed a more consensual management style.

While there is no fear of losing his shirt, his legacy is now being severely tested as the chairman of the ailing Kenya Airways. But it is a challenge he says he could not resist when it came up.

Joseph says he did not start Safaricom to create a legacy. But he thinks we were not put in this world to be consumers, but to make a lasting difference and that forms the basis on which legacies are built.
The story of Joseph and the Safaricom he built points to another truth. That the business success as measured by the financials are a by-product of a genuine desire and drive to provide a good or service to the customer’s satisfaction.

That if you focus on the end-game, customer satisfaction through improving service the bottom line will take care of itself.

Wednesday, March 14, 2018


In the wake of all the brouhaha about SIM cards my mind raced back 20 years when the mobile phone really took off in Uganda.

It’s true that mobile phones first emerged in Uganda in 1994 with Celtel, but it really became a necessity rather than a luxury in 1998 when South African based MTN set foot in this town.

There are a lot of things that happened then that most would find hard to wrap their minds around.
Can you imagine that airtime used to be billed in dollars? And that there was something called a service charge -- $10, which was charged weekly? If you didn’t renew it your phone would go dead – you couldn’t receive or make calls.

Can you imagine that for the longest time you could only buy airtime from the Celtel office on Wampewo Avenue? And this was only from Monday to Friday excluding public holidays. So if you run out of airtime on Friday evening you were doomed till Monday morning. There was no Me2You. Can you believe the lowest denomination of airtime available was sh10,000?

Even I would find it hard to believe if I had not witnessed it for myself.

That mobile phones are now ubiquitous is thanks to MTN, whose story is an interesting one and one which maps quite well the changes and changed perceptions around mobile phones in this country.

It all started with local businessman Charles Mbire trooping down to MTN offices in South Africa to make a pitch for the company to come to Uganda. At that time MTN was only in South Africa, content to be a small fish in a big pond. Vodacom was and still is the gorilla in that market.

"The MTN strategists referring to donor statistics – The World Bank reports that our per capita GDP in 1997 was $287, didn’t think Uganda was a good mobile phone market...

But Mbire put his money where his mouth was --- all of $2m and offered to partner in the venture. Which made them think if a local businessman was willing to take the risk they needed to take a second look.

They eventually came and bid for the Second Network Operator (SNO) License, which they won. As part of the conditions of the license they were required to have rolled out (we were still thinking in terms of physical lines) 89,000 lines in five years.

Today MTN Uganda reports that it has just under 11 million subscribers but at that time the total number of lines in Uganda stood at 50,000 lines! Or that in 35 years of independence Uganda Posts & Telecommunications (UPTL) as it was called then had managed to roll out about 1,500 lines a year.
So we though they were setting MTN up for failure. How would they roll out in five years what the might UPTL couldn’t do in three decades?

Well on day one in November 1998 MTN opened shop. And their main switch promptly collapsed.
The story goes that the 14,000 line switch installed at Mbuya, which was thought would be more than adequate for at least the first three months, crashed under the weight of the new demand. And this was before noon.

And what was the price of SIM card? Sh70,000!!

Long and short of it, Ugandans snapped up those lines like nsenene on a November evening and the 89,000 target was surpassed before the year was done....

A lot has gone on since then that to sum it up with the cliché “and the rest is history” is to seriously short change the story.

Since that first day we started paying our phone bills in Uganda shillings, the weekly service charge was dropped, the lowest denomination for airtime is now sh500 and we discovered texting.

About the sh500 airtime denomination, I remember then marketing manager Eric Van Veen declaring that they may never go below the sh5000 denomination airtime card – they were made of plastic, about the size of a playing card, because it didn’t make economic sense. 

Since then we moved away from voice where, only but ten years ago in 2007 MTN Uganda was reporting an Average Revenue Per Unit (ARPU) of $10,  which has now fallen to $2.11 in 2016.
The action has moved to data service where MTN now has 1.5 million active data subscribers and 5.2 million mobile money users.

As a journalist reporting for a foreign media agency I used to type or handwrite a story, walk over to the post office to have it faxed. Depending on demand I would have to wait for my story to be faxed after which I would call Nairobi to find out if they had received it. More often than not they transmission would be incomplete and would have to be repeated or just page two and four of a five page fax. And then I would have to stay by the phone at the office in case Nairobi had any questions.

Numbers were hard to come by but that mobile telephony has forever altered the economy of Uganda cannot be disputed. The anecdotal evidence alone is overwhelming.

Today I could send my story of the phone, having already downloaded background off Google and can even transmit and audio and video file, and all in a fraction of the time it took then. Leaving me time to chase other stories. I shudder to think at what my output today would be compared to then. 

This improvement in efficiency and output is mirrored in whatever sector you can think of – manufacturing, transport and general trade. And they say we haven’t even begun to tap the full potential of the mobile phone...

Since that exciting day in November 1998, MTN has paid sh3.7trillion in taxes to the treasury –sh450b alone last year, contributed sh120b to the Rural Communications Development Fund, which is now 2 percent of their gross revenues and It employs thousands directly.

And it has been good business for MTN too, last week they reported revenues of about sh1.6trillion in 2017.

If mobile telephony has become such an integral part of our lives and the general economy, one needs to look to MTN as the trailblazer.

As part of the liberalisation experiment, MTN has to have been the most successful in creating improved efficiencies, increased output and revitalising an industry.

If we can only match the changes that have happened in the last twenty years over the next two decades, I shudder to think how life will have changed by then … no more offices? Ownerless cars? And for the kids? No School?