Airtel in leadership crisis, as MTN celebrates 10 million subscribers

MTN Uganda continues to cement its market leadership, as rival Airtel gets embroiled in top leadership changes.

Market reports indicate MTN subscribers are set to hit 10 million in the first week of June 2014; with very few subscribers remaining to announce this. This comes a few weeks after MTN announced the first quarter results for the period ended March 31, 2014. MTN reported an increase in subscriber base by 8.4% to 9.5 million, mainly attributed to attractive bundled offers aimed at both acquisition and retention in addition to regionally focused sales and distribution campaigns that further supported the performance.

MTN is said to be implementing a strategy codenamed “Yellow hawk.” The Yellow hawk is based on four major strategic priorities:Keep mobile money at not less than 65% of the market share through high innovations, excellent customer care and 80%+ MoMo systems uptime in addition to system security with minimal frauds;

Dominate data/internet by leveraging on mobile money success and state-of-the-art new LTE infrastructure (MTN boasts of accumulated investment in Uganda to a tune of Ugx 1.7 trillion);

Diversify through MTN business; and Create brand equity through strategic CSR interventions.

Enter Airtel’s leadership glitches

Meanwhile, Airtel is slowing on its progress since making a milestone of 8.3 million subscribers following their acquisition of Warid and Yoola Omudidi promotion that helped bring in new low/middle-end client acquisitions. Airtel is said to be getting stuck in the sludge owing to a leadership vacuum that has been created in recent few weeks.

It is said that majority of Airtel subscribers acquired from Warid were unregistered. Considering these were mostly low-end clientele, they did not embrace Sim card registration. Hence Airtel now finds itself with many unregistered users on their network. As of early May 2014, Airtel is said to be losing close to Ugx 400m monthly due to blocking of between 70,000 and 100,000 non-registered Sim cards on their network, following a directive by the company’s senior management aimed at cleaning up their operations. Apparently, in the month of April 2014, all unregistered Sim cards on Airtel network were barred from making outgoing calls, effectively losing substantial amounts. This magazine has learnt that Airtel is likely to stay the implementation of the blocking of unregistered subscribers in favour of encouraging them to comply through SMS and word of mouth throughout their distribution network, as other telecoms are doing.

Analysts say the departure of Mr V.G Somasekhar left a big gap which is yet to be filled to date. Mr Arindam Chakrabarty (who joined Airtel in August 2011 as marketing director) is working in acting capacity of the MD position.

The company is said to be sourcing for a new managing director who is expected to report sometime in July or August 2014. The top leadership changes at the industry’s number two have been so abruptly. Mr Chakrabarty had just been promoted to position of chief commercial officer from a position of project director for Airtel Warid acquisition he got in May 2013, and now is the acting top honcho.

And that is not all, the company’s finance director, who would act as the deputy managing director, is said to have been recently transferred to another country.

These are top leadership positions that play a leading strategic role. The institutional memory advantage for sustainable growth is slowly being lost. Changing key people at the same time is a strategic mistake and Airtel risks going some six months backwards. The operating environment remains tough with persistent price competition and regulatory challenges.

Just like in any business, it is suicide to lose the MD and CFO at the same time. That is what Airtel just did.

These roles are very strategic and to a large extent surrogates in terms of key decision-making. For example, the Airtel Warid acquisition, sorry a merger, involved the top leadership of Airtel playing a key role in negotiating with top government officials and by the time it got to the regulator, it was déjà vu, an already done deal! Business is about networking. Because of rapport created, it is easy for the managing director to engage authorities at all levels including making a call to the relevant minister or regulator, etc. It will take some time for the new managing director to create good relationships with several stakeholders. In the process, many opportunities will have been lost.

Of course it is normal for MDs to change or move on. However, such a process must be carefully managed such that the incoming MD is properly introduced to all business partners and stakeholders or as it is called in Uganda “handed over” so as to continue the deals and relationships as the outgoing MD was doing. Unfortunately, the incoming managing director won’t get the normal few months period to study and understand company culture and market dimensions even if the new managing director is coming from competition, as this magazine has reliably gathered.

No space for the weak

Airtel finds herself at crossroads. The company has so many areas to grow and is losing focus. They want to grow data/internet, push mobile money to 30% market share, turn more than 40% of their customers to A, B+ subscribers, fix human resource issues, get out of the Warid product shadow and of course cut churn rates. All these areas are tricky considering the current market landscape.

The internet/data segment is increasingly getting contested as all telecoms are focusing on growing it. MTN and Orange have made huge gains especially with corporate subscribers through product differentiation. And UTL has tried to focus on the tail end of the market by competing on cost – they offer their WiFi modems at Ugx 400,000 (installation fee) which can serve up to eight computers at a monthly flat fee of Ugx 120,000 with unlimited data usage – though the speeds keep varying since these are connected on a shared link. But it does the job for anyone who is patient or can work on Sundays and late in the night when the link traffic is eased.

Mobile money is all about convenience in terms of access (locations) and liquidity, security and system up-time. Majority of people using mobile money are not so much bothered about price – rather, about the convenience of sending and receiving the money. For that reason, people will use the provider who is readily accessible to both the sender and receiver. And that is how Airtel, Orange and UTL find themselves in a tricky position – limited mobile money outlets countrywide.

To leverage from its distribution network, MTN, justifiably, does not encourage a registered MTN mobile money agent to deal in other mobile money services of the competition. Either you deal with MTN or not. Most people will opt to deal with MTN because it has the highest turnover. That means such agents will operate other products (if they have to) under the table. To compete, a telecom must invest in a strong agency network. There has been an attempt by telecoms to partner with petrol stations to fix the problem which has been found unsuccessful by this magazine’s April 2014 study. Petrol stations staff are more concerned about the pump than offering mobile money. Plus most petrol stations are not strategically located.

The best move is for Airtel to return V.G Somasekhar or steal Mazen from MTN (if such a thing is possible.) Bringing the former Warid CEO, Zul Javaid, could also be a good move as he already understands the market and the tricks. Otherwise, Airtel is trying to move too much at the same time at the expense of other critical commitments, and it is showing. For example, since taking over the Uganda Cranes sponsorship from MTN U, the visibility of Uganda Cranes and local support is dying out slowly. For example, the ongoing CAF qualifications are no longer attracting much buzz and public interest as it used to be when MTN was doing the sponsorship. Thanks to MTN, many people used to know the Uganda Cranes team players by name and the public was getting emotional connection and attachment to the national team. Unfortunately, all these are disappearing.

Who will take the Airtel hot seat? We will let you know in the next issue.

March 20th, 2018 | by

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