Safaricom is beefing up to play in a new commercial space

Business

Safaricom is beefing up to play in a new commercial space


As Safaricom’s mobile calls and short message revenue lines stagnate due to an increasingly saturated Kenyan market, Kenya’s largest telecom operator has become dependent on mobile money, M-Pesa.

Safaricom is also eyeing new positives in the money market and insurance products, expanding data offerings to fifth-generation (5G) technology and opportunities in the Ethiopian market. The Business Daily spoke to Safaricom CEO Peter Ndegwa about the progress of these plans.

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YOU HIRED MICHAEL MUTIGA FROM CITI BANK. IS THIS INDICATIVE OF THE PATH SAFARICOM WANTS TO GO IN TERMS OF PLAYER IN FINANCIAL SERVICES?

I think what we’re communicating is that growth will be a big enabler of the strategy, especially for this fiscal year, and it will extend beyond our core connectivity business and also our core payments type.

We have to look at partnerships, mergers and acquisitions and financing options, even as we enter a phase like Ethiopia, there have been questions about how you finance and all that? So we’ve had the business development strategy for the function, but we also need skills that allow us, as we move into the next phase of growth, for people who have that M&A experience to drive partnerships, to structure agreements.

WHAT ARE SOME OF THE PIPELINE DEALS YOU HAVE CALLED ON TO HELP YOU CLOSE?

First, I think Michael is only a week old, so it’s too early to tell what acquisitions he’s going to make. He must first get into the business. It’s on a lighter note.

So it’s not that there’s an M&A pipeline that we expect Michael to complete. But that is to say that our direction of travel requires that we have skills that allow us to accelerate, not just the organic and the areas that are close to what we are doing but those with which we are worse off. ‘easy.

So as we get into those areas, we need partnerships, we need mergers and acquisitions, etc., and when those happen, we’ll communicate. So that’s why we’ve brought in someone with Michael’s qualifications and hopefully he’ll be up to it.

YOU LOOKED FOR INSURANCE AND MONEY MARKET LICENSES. IS THERE ANY PROGRESS IN OBTAINING REGULATORY APPROVALS TO PLAY IN THESE AREAS?

The way I would see that is we’ve been really strong in some of our traditional products like person-to-person transfer withdrawals, we’ve extended that to credit, we’ve started to really focus on the lifestyle of individuals but also to empower companies through applications. Now we really want to expand beyond those areas to go beyond financial inclusion.

The thing is, as we move through our pipeline innovation process, we work with regulators to make sure they approve as we move forward.

There are some that are more or less close to being approved or that have been approved, and there are others that are more advanced, and I would prefer not to go into too much detail. But I think we are making very good progress, especially in partnerships with manufacturers.

EVEN WAITING FOR APPROVALS, HOW DO YOU PLAN TO DEPLOY THESE NEW BUSINESS LINES, PARTICULARLY AROUND FINTECH?

We are what you call a fintech digital ecosystem and as we continue to empower businesses and customers, we are also empowering the fintech community where we have approximately 2,000 developers on our platform.

The intention is to energize not only what we do, but also the partners within the whole ecosystem. We envision breakthroughs in new areas of financial services, wealth management, insurance and savings compounds. We hope to see how M-Akiba was and you heard the government say they want to revamp it.

These are the kinds of things we want to do as they help to protect customers, for example during Covid. We want to accelerate credit and savings-led private compositions within our ecosystem.

BY GETTING BIG IN THE FINANCIAL SPACE, YOU FACE DOMINANT PLAYERS LIKE BANKS. DO YOU THINK YOU HAVE AN ADVANTAGE OVER THEM?

There are more than 38 banks in the country, and there are MFIs [microfinance institutions]. How to open the ecosystem to support them in the development of products and services on our platform? Good examples are HF whizz, Absa’s Timiza, NCBA’s Loop, etc.

They build on our ecosystem and we’re going to open up that ecosystem more broadly to enable and empower third parties to develop products and services in our ecosystem, but also have innovative strategic partnerships in areas that we believe they are important to grow as a company.

THE CHINESE REFUSED M-PESA FOR THE EXPRESSWAY, WHAT SOLUTION HAVE YOU DEVELOPED FOR THEM?

We are still working with them, we are trying to see how to introduce solutions that make it faster. I think what you read in the newspaper is not quite the right story. We researched how to do it. Whether it’s a card-based system they’re launching, they have top-up functionality on M-Pesa.

We think we have the solution and we are working with them to test it and see how it goes and personally for me, without paying with M-Pesa they will have a challenge, but that’s a personal opinion. We are working closely with them to see how we can unlock all the challenges.

YOU ARE THEREFORE NOT LOOKING FOR PAYMENTS ON THE TOLLS BUT RATHER ACCOMPANIMENT TO LOAD THEIR PAYMENT CARDS?

No, we will look at direct payments from M-Pesa. But if they have prepaid card solutions, we can always top up a prepaid card, that’s ok, it’s already available, but we would like customers to pay directly from M-Pesa.

YOU ALSO LAUNCHED 5G LAST YEAR, WHEN DO YOU SEE YOU FULLY COMMERCIALIZING THE TECHNOLOGY?

We started our trial last year and were looking for opportunities to expand it. What we’ve seen from global experience and companies within the global Vodafone/Vodacom ecosystem, we see that the opportunity to monetize 5G starts with the fixed wireless opportunity and that’s something that we dedicate.

We have sites that currently allow us to operate, but it is very small. But in this exercise we have the ambition to increase it in terms of the resources needed, so it’s not necessarily a lot on the capital side, but I think the frequency, the spectrum that’s needed, so we we are engaging with the regulator to ensure that we have the right spectrum to offer these services.

It’s fair to say it still won’t be at the scale you’ll see, but it’s a bit of a trial run, then prove, then get into business monetization, then move on. scale later.

WHAT ARE SOME OF THE CHALLENGES YOU FACE DURING THE LAUNCH OF 5G?

Until handsets can receive 5G at sufficient scale from an individual mobile perspective, there really isn’t a need to have a lot of sites that offer 5G. But for those who have fixed wireless instead of fiber, especially in places where we don’t have fiber in urban areas, 5G will provide a fiber-like experience, and that’s why fixed wireless is the initial use case.

And it’s not without consequence, it’s actually a very strong use case in other countries that are making a very big difference in terms of connectivity, and you’ve seen that we’ve grown our fixed and fiber business , and we see an opportunity to accelerate this in the future.

Because 5G-enabled devices are still very expensive, that’s one of the reasons we’re focusing more on the 4G side and letting 5G serve homes rather than your mobile internet.

WHAT ARE THE UPDATES ON THE ETHIOPIAN ENTRY, DO YOU HAVE A LAUNCH DATE?

In Ethiopia, we are still on track to launch commercially this year. We are still committed to making sure we launch commercially this year and by the end of the fiscal year we would have achieved population coverage.

We’re waiting to see when we have a thousand sizes to do a full commercial launch. We are in the process of entering into an agreement with Ethio Telecom which allows us to put in place all interconnection transmission and tower sharing agreements.

NOW THAT THE AMERICAN FINANCIERS HAVE WITHDRAWN, DO YOU HAVE ANY ALTERNATIVE FUNDING?

In terms of funding, I think we are secure for now. There are options we’re looking at, and we’re happy to share them when they’re finalized.

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