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Kenya: Telecoms Operators Raise the Stakes in Advertising Market
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Business Daily (Nairobi)
6 July 2008
Posted to the web 7 July 2008
Michael Omondi
Celtel's advertising budget is expected to cross the one billion shilling mark this year from Sh660 million last year.
July 7, 2008: The battle for advertising business in the telecoms sector has ended with a few big winners and many losers - setting the stage for one of the most competitive marketing wars ever fought in Kenya.
Advertising agencies have over the past 15 months been fighting for a piece of the telecoms advertising cake as two new operators prepare to enter the market.
With the two mobile telephone firms - Safaricom and Celtel and the two new entrants, Econet Wireless and Telkom Kenya - poised to account for the largest share of advertising spend, the stakes have never been higher.
This rise of telecom firms as the new elephants in the advertising house is being accompanied by the advent of a powerful clique of advisors who will pocket hundreds of millions of shillings in commissions and professional fees. They include Bharat Thakrar's ScanGroup, Koome Mwambia's Ogilvy East Africa, Annette Martyres' Access Leo Burnet and Thomas Omamo's ZK Advertising.
The four are set to be the rulers of the media services business, whose fortune will see them, control a purse in excess of Sh4.7 billion. At this rate, the telecoms sector is set to account for about 30 per cent of Kenya's total advertising budget that stands at about Sh15.6 billion.
The national advertising spend has doubled in the past one year, driven by intense competition between Celtel and Safaricom. Besides helping grow the size of the market, intense rivalry between the two operators has seen the telecoms sector overtake makers of First Moving Consumer Goods (FMCG) such as East Africa Breweries, Unilever and Coca-Cola to become the biggest spenders on advertising in the market.
"This budget is expected to grow significantly with the coming into the market of the two new players," said Mr Joe Otin, the head of media monitoring at Steadman Group.
Econet Wireless, which is partly owned by India's Essar, is set to rollout its services later this month, while Telkom Kenya, owned 51 per cent by France Telecom, is preparing for a rollout in September.
Mr Otin says the combined advertising spend for the four mobile telephone firms could cross the Sh8 billion mark by 2012. Such a development could further stir top tier advertising agencies' interest in the cellular firms.
On this list of high flyers is Scangroup - the holder of the industry's jewel, Safaricom, whose advertising war chest is expected to cross theSh2 billion mark this year up from Sh1.6 billion in 2007. Safaricom also holds East Africa's biggest advertising budget.
Also on the list is ZK Advertising, the company that has been clinging on to Celtel's advertising purse despite a number of agencies angling for the account. Celtel's advertising budget is expected to cross the one billion shillings this year from Sh660 million last year.
Access Leo Burnett, the winner of the Telkom Kenya account, is expected to join the big league together with Ogilvy East Africa that snapped Econet Wireless' advertising account only last week. The account is estimated to be worth Sh700 million.
Winning these accounts has, however, not come easy for these firms. It has taken exceptional deal making skills, networking and management as well as human resource expertise that is key to creating blockbuster adverts that are customary with telecoms operators.
On deal making, Mr Thakrar has emerged as the pedigree horse, especially after he acquired a 65 per cent stake in Redsky with his eyes cast on snapping Safaricom.
Redsky with its creative mind, Erik Van Vliet, on board had won the confidence of Safaricom with their creation of adverts that have invoked nationalist passion and struck a chord with the common man on the street. These adverts have helped Safaricom create a strong brand name and customer loyalty among a huge fraction of Kenyans.
To get his hands firmly on the business, Mr Thakrar made a takeover bid and went ahead to give one million Scangroup shares to Mr Vliet to rope him into the firm. His stay at Scangroup is seen as key to success in holding on to the Safaricom advertising account.
"It is important to tie in Erik in the company (Scangroup). The guy is critical in running the Safaricom account," Mr Thakar told Business Daily in an earlier interview.
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It emerged that Safaricom had demanded that Mr Vliet remains on board for the mobile firm's advertising contract to remain in Scangroup's hands. Players in the industry are in agreement that it's now difficult to wrestle the Safaricom account from Scangroup after it closed the Redsky deal.
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