There is a deep-held view by analysts that Aga Khan businesses never fail. And there are examples to that event. Take the case of Air Uganda. This is a typical white elephant. The company has been around and withstood intense competition from Kenya Airways. Launched in November 2007, it is now more than six years old and still counting. It is said that Air Uganda has made losses for a very long period.
And now Smart telecom is upon us. After running a “give us a name” campaign, Smart Telecom finally came out to the Ugandan market with some big promises.
Speaking at the launch, the CEO of the company said: “At just Ugx 74 (US $0.03), subscribers can make Smart to Smart calls any time, any day.” Underpinning this offer is the need to drive subscription numbers. Telecom is a business of numbers. Once you have them, it is easy to reduce interconnect fees and focus on growing your portfolio.
However, this model may not deliver the required results. Warid had almost a similar strategy. However, it ended attracting the low-end market segment which usually is price sensitive. The result is low revenue from other value-added services like data and mobile money. Ugandan consumers are becoming sophisticated and interested in value-added services. At the time mobile money is becoming a necessity, it is unlikely that low voice rates can induce churn to the new telecom without fixing the supply side first. For example, MTN U rates are considered slightly higher than the competition, but over 8.8 million subscribers on the MTN network continue to use it. This goes to prove that you don’t necessarily need to be the lowest provider to make net gains on subscriptions.
Speaking at the launch last month, Smart Telecoms Group CEO, Abdellatif Bouziani said: “Smart telecom will operate on 074 and it will offer all kinds of mobile value-added services using the latest technology.”
The entry of Smart telecom is undoubtedly going to intensify competition considering the fact that Aga Khan foundation is the investor behind Smart telecom. In Uganda, you have so many companies under the AKDN (Aga Khan Development Network) including Air Uganda, NTV, Monitor, Diamond Trust Bank, Serena Hotel, schools and so many other business interests. Smart telecom’s likely penetration strategy is to interest these companies to subscribe to their network depending on the cost benefit analysis and the value-added services the company can offer versus the cost of the migration to Smart.
So, is Smart telecom an underdog? Can it rise above the huge capital expenditure (capex) that has continued to undermine big companies like Airtel, Orange and the once vibrant Warid to attain the minimum two million subscribers required to break-even in the market? Let’s wait and see.