With an estimated customer base of 16.2 million (27.2 percent market share), it would be expected that Airtel Kenya would be making significant profits like the market leader Safaricom.
However, the telco, which is the second-largest in Kenya after Safaricom, is struggling with multi-billion debts and losses, with auditors warning that the company could soon be insolvent.
For the year ended March 2021, Airtel Kenya recorded a Ksh5.9 billion loss, pushing its cumulative loss to a new high of Ksh77.41 billion.
The telco’s net liability rose to Ksh43.7 billion in the year under review, up from Ksh37.78 billion as of March 2020. The net assets in foreign currencies rose to Ksh8.89 billion in 2020 as compared to its net foreign currency liabilities which stood at Ksh56.17 billion. This means that even if the company was liquidated, it cannot meet its financial obligations.
“These conditions, along with other matters… indicate the existence of a material uncertainty which may cast significant doubt on the company’s ability to continue as a going concern,” warns Airtel’s auditors Deloitte.
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To shore up enough capital to sustain operations, the company increased its shareholder loans to Ksh52.2 billion up from Ksh46.6 billion.
So what went wrong for Airtel Kenya?
Airtel Kenya, which has undergone various incarnations as Kencell, Celtel and Zain throughout its history, was the bigger network in the advent of mobile networks in Kenya.
However, things would change later following a tug of war between Safaricom and Airtel Kenya, with Safaricom placing itself as the option for the “commoners” while Airtel maintained itself as a network for the rich. Things got worse for Airtel with the advent of M-Pesa, Safaricom’s mobile money service.
While Airtel (formerly Kencell, Celtel and Zain) was focused on minting profits, Safaricom was innovating and placing the customer at the centre of innovation.
As of 2010, Safaricom was taking over the mobile market, with Airtel playing catch up to a telco that was stabilizing, gaining massive numbers every new day.
As of 2018, Safaricom controlled 90 percent of revenue in the traditional telcom markets of voice calls and text messages.
In its 11 years of operation, Airtel Kenya has never made a profit, despite the growth of the telecom’s customer base in Kenya.
In 2015, the then Airtel Kenya managing director Adil El Youssefi threatened that the company would quit Kenya if the government did not intervene and solve the problem of Safaricom’s dominance of the market.
“We’ve been trying for over five years. We’ve lost over Ksh50bn ($495m) and not made even a single dollar in profit,” he said. Youssefi would later leave to join Liquid Telecom, where he hasn’t talked much.
Airtel’s biggest undoing has been its constant price wars with Safaricom, instead of focusing on making their services better.
In August 2018, the late Safaricom CEO Bob Collymore predicted a price war before Airtel slashed its call rates. Addressing journalists in Nairobi, Collymore noted that Safaricom was willing to lose its customers to telco, but not willing to engage in price wars.
“We are seeing a new price war coming,” said Collymore.
True to his prediction, the war came, with very little significance. In fact, Safaricom’s revenues have been on an upward trajectory since then, indicating that price wars are never going to win anything for Airtel.
Read: Safaricom is not in a financial distress
Over the years, Airtel has been accused of poor network coverage, a factor that has seen most people opt to use Safaricom due to its stable network in most parts of the country.
In February 2021, the Communications Authority (CA) said Airtel and Telkom Kenya failed to meet the minimum 80 percent threshold on quality of calls across 33 counties in the year ended June 2020.
Telkom Kenya scored an average mark of 73 percent while Airtel had 52 percent in the survey conducted in 2020. Safaricom scored an overall mark of 92 percent in the survey.
“As Airtel’s and Telkom’s performance did not meet the set target of 80 percent for voice services they were issued notices of non–compliance that require the firms to improve their quality of services in the country in compliance with the set threshold,” CA said in the report.
Telcos breaching requirements on the quality of calls and other service outages as a result of omission on their part risk a fine of up to 0.2 percent of their revenues. Fines on top of losses for Airtel Kenya would be detrimental to a firm that has never found footing in Kenya.
Instead of investing in price wars, Airtel Kenya should invest in strong networks that would be attractive to customers, even as the world enters a new era in technology where internet and mobile networks are crucial.
Airtel terms itself as the “Smartphone Network”, but seemingly, the management is making some “unsmart” moves.
While the world is moving towards a 5G network, Airtel Kenya is struggling with unreliable networks in most parts of the country.
With plans for a merger with Telkom having collapsed, Airtel needs to seek new ways of making profits or risk sinking to a point of no return.