The market expects the successor to Bob Collymore to continue Safaricom’s path of investing in innovation and data services to keep the integrated communications company at the top of the competition.
Safaricom delivered a strong financial performance in the financial year ended March 31, 2019, with a 13.1 per cent growth in EBIT (Earnings before Interest) of Sh89.61 billion and a net income rise of 14.7 per cent to Sh63.40 billion.
Michael Joseph’s return as interim chief executive of the country’s most valuable company will reassure shareholders that the firm is in safe hands even as the process of appointing a successor to Collymore continues.
Leadership transition
Joseph laid down the roots of Safaricom’s success in its first 10 years, but must now – just like he did before his retirement in November 2010 – steer the telco through another leadership transition, providing guidance in the recruitment of Collymore’s successor.
Key is ensuring that projects started by Collymore to anchor the company’s next phase of growth are secure and shielding it from political meddling. His advice to the next CEO will be critical.
“Safaricom is not just any company. With a market capitalisation of Sh1.12 trillion, it is holding up the Nairobi Securities Exchange (NSE). Its price is stable and lively, a reflection of the trust investors and the public have in the company,” said Moses Gituiki, an investment analyst with Venture Stocks Ltd.
The next CEO of Safaricom, he added, must be someone who understands the importance of continuity and consistency and the kind of company the telco has become.
“This is not just a Kenyan company anymore. It is international and expanding to Central Africa and other parts of the continent. Many firms globally are trying to emulate Safaricom,” Gituiki told People Daily.
One of the biggest challenges any new CEO will have to navigate is the pressure from predatory hawks in government keen on splitting the company. But Gituiki warns that this would be tantamount to reckless regulatory overreach that a new CEO must fight.
“You do not break up a company because it is a giant. You initiate policies to facilitate market competition that will nurture a suitable rival to the giant. Breaking up Safaricom will hurt the economy,” he said. Key to Safaricom’s growth into a full communication services company has been its heavy foray into data, which has completely transformed the company.
Gituiki said Safaricom is now a micro-bank and a big threat to established commercial banks with Kenyans depositing and transferring funds, albeit in limited amounts, through mobile gadgets thanks to M-Pesa. “People are travelling with digital money in their wallets. And with the big banks cutting back on lending to the small and medium-sized enterprises, Safaricom is anchoring the micro-economy,” he added.
Customer recruitment
Collymore placed customer recruitment and retention at the heart of the Safaricom’s next phase of transformation and embedded the same in the company’s strategic plan that was approved by the board. This helped drive up customer numbers significantly during the year.
“Our top priority for Financial Year 2019 was focusing on the customer and I am pleased to advise that we have witnessed improved customer sentiment, through measures such as NPS (net promoter score, a management tool for gauging the loyalty of a firm’s customer relationships) and brand consideration,” Collymore said in his notes to the March 2019 financial result statements.
He said this translated into an accelerated growth in customers from 400,000 in the first half of the year, to 1.9 million in the second half of the year. Keeping down costs for its customers will also be key for Safaricom. Collymore initiated investments in data analytics to bring down the prices of Safaricom’s services and help it lock down customer loyalty in the face of increased competition from rivals.
In the interim, Joseph will also have to ensure Safaricom does not relax its capital spending to expand its 3G and 4G networks to all towns and villages in Kenya. This is seen as a critical anchor for its services and in the year to March alone, with capital spending standing at Sh37.25 billion.
Fierce competition
Against fierce competition from smaller rivals, Joseph must ensure that Safaricom’s fibre-to-home connections continue unabated, allowing the firm to load more data services tied to reliable bandwith.
In 2018, the firm boosted its fibre footprint to 6,700km from 5,000km and boosted capacity of its M-Pesa platform. By embracing next generation innovation, Safaricom is now using Artificial Intelligence (AI) to increase customer interaction Zuri, a Chatbot assistant, offering automated digital support and saving on costs.
The focus on customers is justified by the firm’s 2018 True Value Report that proved Safaricom’s value to the Kenyan society shot up by 12 per cent to Sh543 billion.
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