News Analysis: Safaricom Succession Signals Continuity

Friday, 23 July 2010

It shouldn’t really matter so much whether a CEO retires or not. But to the extent that Safaricom CEO Michael Joseph’s decade-long leadership has been a key factor in building Safaricom into what it is today, his succession had equally become a key factor in the company’s future, and has long attracted speculation.   In the Kenyan market, Safaricom is an outlier company: Most profitable company, largest IPO in eastern and central Africa, massive market share with over 80% of the mobile subscribers, provider of one of the largest advertising budgets to the local media market, largest taxpayer, a good 800,000 retail shareholders (so the company booked at stadium for its first AGM), first mobile money service worldwide.   Critical Juncture So the stakes are high, not the least because Michael Joseph’s departure comes at a critical juncture: In the past years, Safaricom had been able to fend off growing competition as the market went from two to four operators with France Telecom’s investment in Telkom Kenya, and the entry of Econet, then Essar’s Yu mobile brand. Celtel had been acquired by Middle Eastern operator MTC and was rebranded Zain. All three operators tried to engage Safaricom in a price war, which prove costly for the challengers who, as a consequence, found themselves in a weakened position. However, with the Bharti Airtel takeover of Zain’s sub-Saharan operations, Safaricom faces a new challenger with a lean network business model (Will Bharti Airtel’s Business Model Translate to Sub-Saharan Africa? ). The spat over the new tariff regulations:-Safaricom had protested that a dominant player would be automatically penalised even if not abusing this dominant position (Kenya: Safaricom Willing to Sue Against New Tariff Regulations ). Government had agreed to bring in experts to review the regulations against international best practices, but the regulations had already been signed into law, and there is no final agreement yet. France Telecom’s complaints over disappearing assets and other irregularities in the privatisation of Telkom Kenya have, unsurprisingly, not swayed the Kenyan government to return much or any of the money invested, but amends have been made. Government paid the reduced USD10m 3G license fee, France Telecom will be granted an exclusive operational and maintenance contract for the government-owned, multimillion-dollar nationwide optic fibre network, and Telkom will manage and control GoK's 20% stake in TEAMS. The restrictions placed on Safaricom in the tariff regulations have been seen in this context. Fending off the threats from weak governance and political meddling takes determination and courage and a strategic perspective (News Analysis: Cash Back for France Telecom or Checking Out? ).   Perspectives: Stability and Continuity The market has speculated about Michael Joseph’s retirement for some time, and now that the date and person have finally announced, the signal sent to shareholders and the wider market is a clear emphasis on stability and continuity:   Joseph’s successor, Bob Collymore, Vodafone Governance Director for Africa, is familiar with the company: He has been a board member for the past four years, and his strong corporate governance background will undoubtedly useful to fend off the many desirous demands on one of Kenya’s most prominent corporates. Michael Joseph’s insights into the peculiarities of the Kenyan market will not be lost: He will stay on, for at least a two-year period, as a strategic advisor and board member.   So business as usual? It looks like Safaricom will be able to move on to life after its charismatic leader. Not a concept popular with the region’s political leaders. Will others – e.g. Equity Bank – be able to achieve the same? Share this article with others: Comments (0) Subscribe to this comment's feed Write comment Show/Hide comment form Name Email Title Comment smaller | bigger Subscribe via email (Registered users only) I have read and agree to the Terms of Usage. Add Comment