Celtel Kenya fires executives amidst declining fortunes

Celtel Kenya fired its top managers, cementing a notoriety for high staff turnover, as its performance fails to impress in the lucrative mobile phone industry.

Celtel Kenya head office in the Kenyan capital, Nairobi

Celtel Kenya head office in the Kenyan capital, Nairobi

This week, Celtel announced that its head of corporate and regulatory affairs, Dr Claire Ruto and the corporate affairs manager, Janet Kabue had, “left” the company. Chief Executive David Murray left a few months ago as did the Marketing Director, Anna Othoro. The departures come in the wake of the successful launch of an Initial Public Offering by Celtel’s competitor, Safaricom that netted billions of shillings at the Nairobi Stock Exchange.

In eight years of fierce competition, Celtel has only managed to acquire 3 million mobile phone subscribers compared to 10 million for Safaricom. In the past year, Safaricom announced profits of close to US$300 million, the highest in East and Central Africa. Celtel has announced profits only twice since it began business in Kenya.

A couple of years ago, Celtel declared a profit of US$18 million, while Safaricom made $250 million the same year. The next year, Celtel declared profits of only $1 million and that was the last time Celtel made its finances public. It goes without saying that the CEO at the time was later fired!

Staff turnover at Celtel Kenya is so high that the media is never sure who the CEO is at any given time. This week, company said there will be a new CEO by early July.

Despite the management changes, Kenya’s second largest mobile phone company isn’t making headway in the market inspite of massive discounts in its calling rates.

But why has Celtel failed to capture the imagination of Kenya’s mobile phone market inspite of a promising beginning in the year 2000?

Celtel began life as Kenya Cellular Communications Ltd, or Kencell. It was a joint venture between Vivendi of France and Sameer Investments of Kenya. Sameer is controlled by Mr Naushad N. Merali, one of Kenya’s weathiest investors with links to top political figures. At the time, the shareholding in Kencell was 40% for Vivendi and 60% for Sameer, in line with regulations of the Communications Commission of Kenya.

Between 2000 and 2003, Kencell grew faster than Safaricom due to its high quality voice and data network. This was when Safaricom was experiencing teething problems due to its association with the bankrupt Telkom Kenya. The Safaricom network was congested and prone to breakdowns.

However, from around 2002, Safaricom began rebranding itself as a, “cheap” network. It began a billing system based on seconds rather than minutes. Strictly speaking, its cheaper for customers to pay for the minute rather than paying for each second. But Safaricom realized that Kenyans have, “peculiar” calling habits where the average phone call lasts only a few seconds. Kencell, with its full-minute billing lost the battle.

As one Safaricom advert put it, “Why pay for a whole minute when you can pay for only the seconds you talk?”

Kencell eventually changed its tariffs to per-second billing but the damage had been done.

In 2005, Vivendi of France sold its 40% stake in Kencell to Celtel International hence Kencell changed to Celtel Kenya. However, the entry of Celtel into the Kenyan market brought other complications.

Celtel adopted a Pan African marketing strategy of using the same advertising campaigns throughout the region. What Celtel failed to understand, is that Kenyans do not like to be associated with the rest of Africa! Kenyans are not Pan Africanists, instead, Kenyans prefer looking up to Europe and the United States. Celtel realized their mistake after two years of wasted advertising worth hundreds of millions of shillings. In the meantime, Safaricom was making localized advertisements that helped draw in millions of customers thus expanding its market share. Indeed, Safaricom adverts went ahead to win international awards.

In the past year, Celtel has lowered its tariffs, making it the cheapest network in Kenya. Unfortunately, most Kenyans are hooked to Safaricom, beleiving that Celtel is an “expensive” network. The early battles between per-minute and per-second billing are still fresh in the minds of many.

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7 Responses

  1. A really interesting piece. I’m based in London and found two statements particularly interesting; 1) That Kenyans are not Pan-African in outlook and 2) That Kenyans have ‘peculiar’ habits when using mobile phones. My beautiful Kenyan lady introduced me to ‘flashing’ which I hadn’t known about. I couldn’t help wondering what Kenyans were saying to each other in calls lasting for a few seconds. Presumably, calls are kept short to keep costs down.

  2. True, the shorter the call, the cheaper. That’s why per-second billing is popular in Kenya. This is how it works:

    Imagine your mobile provider charges Kshs30 for sixty seconds. If you call someone and ask, “Hey, where are you?” your call will last about 10 seconds.. Divide that by Shs30 and you end up paying about Shs5. In some cases, its actually cheaper to call than to send an SMS!

    And its also true that Kenyans do not have an overwhelming sense of African nationalism. Just look at the country’s stance during apartheid South Africa. But the advantage of Kenya’s non-charlance about Africa is that everybody is welcome. Nigerians, South Africans, Liberians, Libyans, Egyptians, Rwandese, Ugandans, Somalis, etc have all made a home in Kenya. Not forgetting every racial group on earth.

  3. Thanks for your detailed reply!

  4. Even with their lower call charges, I still dont feel them. Even with the rebranding, I still dont feel them.

  5. 4sGood idea.7a I compleatly disagree with last post . pry
    паркет и ламинат 6c

  6. I admit that our knowledge of the Caucasus may not be as detailed. Please give us more information to shed light on the crisis there. Thank you.

  7. Zain (read celtel) lost its competetiveness because it failed to work with dealers the way safaricom did. Any insider in the telcom business will tell you without countrywide dealer support network you are dead on water before you even start.
    Dealers were put on a one-off 350/- per activation commssion without future gains on the sold line thus limiting growth for dealers hence the subdued presence on the ground for such a large company.

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