Safaricom Targets Its East African Neighbors

Safaricom Targets Its East African Neighbors

Safaricom, Kenya’s main mobile phone operator, is planning cross-border expansion for the first time, into the untapped market for ecommerce and mobile payments, according to its chief executive Bob Collymore. 

Collymore said Safaricom, would initially target its east African neighbours, but is also considering west Africa.

The company’s market capitalisation reached $10.5bn on August 29 after its share price hit an all-time high of Ks27.25 but this has slipped by 9 per cent in the stock market sell-off after the supreme court nullified the result of last month’s presidential election.

Analysts said the big prize would be to establish a foothold in Ethiopia, which this year overtook Kenya as the largest economy in the region and has a population of 100m. But they acknowledged it would be hard, because foreign banks, telecom companies and retailers are banned from the country.

Other countries would see Safaricom as “a bit more of a threat if we come in as a mobile operator”, Collymore told the Financial Times in an interview. “But . . . we want to go into white space . . . space that no one is in at the moment and no one is in ecommerce.” 

Safaricom’s version of ecommerce, to be called Masoko, would aim to be more like China’s Alibaba and combine ecommerce and mobile payments, rather than Amazon, Mr Collymore said. 

“Amazon has inventory and is managing logistics and we don’t want to hold inventory,” he said. Safaricom wants to create a marketplace that connects businesses to consumers but also businesses to other businesses, he said

Several ecommerce companies operate in Kenya — the largest being Nigeria-based Jumia. Others include Kili Mall and OLX. Most follow Amazon’s business model of holding inventory and the sector is still very small: sales are estimated at under 1 per cent of mobile payments, according to the Communications Authority of Kenya.

The expansion will be funded by Safaricom’s telecoms business in Kenya. In the year to March 2017, it recorded a 27 per cent increase in pre-tax profit to Ks70.6bn ($684.7m), helped in large part by a 32 per cent growth in revenue from its Mpesa mobile money platform to Ks55bn.

Collymore, who took over as chief executive in 2010 and had his contract renewed for two years in May, plans to roll out Masoko in Kenya later this year to “prove the concept”. 

“In two to three years’ time we will be in four to five African countries,” he said. “I don’t think we’ll step out of Africa because that’s too far and you have lots of other challenges.” 

Collymore said the expansion has been made possible by the completion last month of the sale of 35 per cent of the company by London-listed Vodafone to South Africa’s Vodacom, which is majority owned by Vodafone. 

Join discussion