MTN takes a firm grip on Kenya online business space - Daily Nation

MTN takes a firm grip on Kenya online business space

Tuesday August 11 2015

Online retailer Jumia connects Kenyans to new

Online retailer Jumia connects Kenyans to new products across mobile phone brands, clothes, utensils, among others. FILE |  NATION MEDIA GROUP

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South Africa’s telcom giant MTN has made a stealth entry into the booming e-commerce business in Kenya, steadily taking a commanding lead in the online shopping space.

The mobile company, which is Africa’s biggest, had unsuccessfully tried to enter Kenya in 2008. Apparently, the firm never gave up on Kenya and has been covertly making forays into the local online shopping market, a strategy that seems to have found its rivals off-guard.

In its latest mission in Kenya, MTN has found an ally in Millicom, another mobile company with presence in 14 African markets under the brand name Tigo.

The two are part of a joint venture, African Internet Holdings (AIH), launched two years ago to revolutionise the online shopping business in Africa.

AIH, which operates under various names, now has presence in 13 African countries, with Kenya being one of the main centres.
Logical extension

“It is a logical extension of our business as we seek to add more value to our large client base and leverage on our many assets, from billing systems and a trusted brand, to access to mobile money platforms,” MTN Group chief digital officer Herman Singh told Smart Company.
“We perceive Kenya as an important market because of its high mobile penetration rate.”

Currently, AIH operates nine ventures across Africa. In Kenya, it runs Kaymu, Jumia, Lamudi, Easy Taxi, HelloFood and Jovago.

But it is the impact this online market has had on MTN business that should be a source of concern to the local telcom operators that are currently entangled in a battle over dominance.

Mr Singh said the group’s expansion into online businesses saw MTN mobile money subscribers across Africa grow by 45.8 per cent between January and end of June 2015. He says subscribers carrying out online deals opted to use MTN for convenience.

“MTN is well-positioned to tap into the digital space on the African continent and in the Middle East. The Group’s digital function aims to leverage our brand, customer base and distribution network to accelerate growth in e-commerce. We perceive Kenya as an important market because of its high mobile penetration rate,” said Mr Singh.

Mr Singh promises more activity on the continent through deepening of partnership with AIH. “We continue to roll out a range of e-commerce and lifestyle offerings with 128 operations across 30 markets,” he said.

South Africa’s business publication Financial Mail reported early this year that MTN planned to invest Sh30 billion ($300 million) over the next two to four years in two of its online enterprises.

“MTN partnership with the e-commerce firm AIH provides a growth opportunity in digital space in areas such as e-commerce or online shopping, and mobile money in Africa and the Middle East,” MTN Group Chief Executive Sifiso Dabengwa was quoted by Financial Mail.

Bogged down by its ailing voice business, MTN diverted its energy towards e-commerce, targeting the Kenyan market, which it had sought to enter for a long time.

In the battle for the e-commerce space in Kenya, MTN has beaten even Safaricom, East Africa’s largest and most profitable company. It has achieved this through wide coverage as it seeks to strengthen its revenue base.

To boost its earnings, Safaricom has mainly focused on data and M-Pesa mobile money service. Its voice revenue has been a letdown, increasing only at four per cent annually on average. In the year ended March 31, Safaricom’s after-tax profit stood at Sh31.9 billion.


Through M-Pesa, Safaricom has also partnered with Easy Taxi, with the latter’s customers using Lipa Na M-Pesa platform.

Safaricom has been trying to crack application-based online businesses without significant success. It introduced 411, a news service that sends SMS alerts to subscribers. It also tried ‘Daktari’ a product that allows subscribers to seek a doctor’s prescription using a short text message. This, however, did not pick up in the market as envisaged.

International Data Corporation analysts say companies based in saturated mobile telephone markets are very keen on growing their revenues by acquiring stakes in mobile, fixed, and data operators, strategies that local telcom companies do not seem well prepared to counter.

The South African mobile giant also operates MTN Business, a Kenyan data cable company acquired in 2008 after buying 60 per cent stake in UUNET Kenya, marking its first entry into East Africa’s largest economy.

The cable business renewed rivalry in the corporate data market, with competitors such as AccessKenya, Safaricom and Telkom Kenya.
As the then Zain (currently Airtel Kenya) was put up for sale in 2009, speculation was rife that MTN Group had huge interests in the company. The deal, however, did not materialise.

Although its past bids to get a share of the Kenyan mobile market faltered, MTN’s new strategy in tapping the thriving online domain seems to be bearing fruit.

The South African company is in fact now calling the shots in a territory that market forces had initially kept it off. For instance, Jumia is probably the most popular of the online shopping platforms that MTN and partners operate in Kenya.

Jumia connects Kenyans to new products across mobile phone brands, clothes, utensils, among others. What is even exciting consumers is that Jumia’s goods not only come at competitive prices, but are delivered at your doorstep.

Jumia has joined hands with Kaymu, also an online shopping platform selling mobile phones, electronics and trendy wears.

“We look forward to being a launch pad for top international brands launching new products in Kenya. We also look forward to on-boarding more retailers into the Jumia online marketplace to promote local entrepreneurship and bridge the gap between the online and off-line stores,” says Jumia Kenya managing director Parinaz Firozi.

Interestingly, Jumia and Kaymu operate by allowing merchants — including start-ups such as a student’s enterprise with a handful of items — to list their range of products on the virtual shops.

The small entrepreneurs benefit from marketing, competitive pricing as well as on delivery logistics of the goods to a buyer’s home. In turn, Jumia and Kaymu earn a commission from the sellers’ earnings.

In 2013, Jumia was awarded the “Best new retailer launch of the year” award at the prestigious World Retail Awards ceremony, becoming the first African company to receive the recognition.

MTN is also deeply involved in Jovago, an online hotel-booking platform launched in Kenya two years ago. Jovago is owned by MTN and Tigo.

MTN’s business multi-pronged structure has set its sights on taking a firm grip of Africa’s online space. And just last week, Jovago opened six more offices in Dar es Salaam, Dakar, Douala, Algiers, Abidjan and Addis Ababa.

Previously, it had presence in Kenya and Nigeria.

“We are closing the gap between Africa and the world by ensuring that even the most remotely located hotel is given a chance on the world wide web, hence attracting global attention from potential and returning tourists,” said Ms Estelle Verdier, the managing director for Jovago in East and Southern Africa.

In a statement last week, Jovago said that in the last six months, it has captured 40 per cent more hotels in the world market while its staff have increased by 50 per cent. Bookings on the site within the period went up by 30 per cent.

Jovago CEO for Africa Paul Midy said MTN, Tigo and AIH businesses are run on a “new-age business model” in which customers take charge of their purchases.

“We have achieved this by constantly optimising our website (on mobile devices as well) to handle a growing and demanding traffic. We also provide different payment platforms to deter the risk of fraud and ascertain safe transactions. Our payment modes are M-Pesa, Tigo Pesa, and pay-at-the-hotel,” said Mr Midy.

Despite Kenya’s ailing tourism industry, Jovago has pointed out strong points that it uses to attract visitors to the country.

“The World Economic Forum ranks Kenya among the top 10 of the most web-searched destinations for natural tourism. It is therefore important for entrepreneurs in the travel market to identify and adopt technology as a key driver for success and growth of the industry,” said Jovago.

Easy Taxi enables over 20 million users across 30 countries in the world to book a cab using a mobile phone app available on Widows Phone Store, Google Play, Apple Store, Firefox marketplace, Amazon and WebApp.

The transport firm is, therefore, the country’s best bet for a reliable transport option especially for tourists.

MTN, Tigo and AIH are also in the online real estate business across various African countries through Lamudi.

The three firms have also extended their appetite for online trade into the food delivery business through HelloFood, which is also available in the entire continent. The firm delivers food to a customer’s table just by tapping an application on one’s mobile phone.

Experts say the success of M-Pesa and the mobile phone in Kenya has stirred up interest for the online market with foreign investors salivating for a piece of the brisk telcom and ICT business in the country.