Chris Gabriel, CEO Zain Africa
“Zain Africa is not for sale”, the company’s chief executive officer Chris Gabriel stated emphatically in November at the AfricaCom conference in Cape Town. In February, Indian telecoms company Bharti announced it was offering $10.7bn for the Kuwaiti-based mobile phone group’s Africa assets.
In this transcript of a wide-ranging interview with Gabriel, conducted at the conference in November, he spoke about declining ARPUs, potential growth areas and the future of data services in Africa.
The Africa Report: Which market is currently Zain’s fastest-growing operation in Africa?
Zain is resident in 16 operations in Africa and Nigeria is by far our biggest operation, it’s over 42% of the business and has probably the greatest potential in Africa. In terms of fastest growing, I’d say that Ghana is probably our fastest growing, that’s our recent greenfield site. We started that very, very recently [December 2008] and we’re well and truly over 1.4m customers in Ghana as we speak. That’s gone from 0 to 1.4m in a very short space of time.
Penetration is very low across Africa and we see Africa as a very significant growth engine and will be a profitable growth engine on the basis that we are optimising our business model and making sure that we can profitably service all segments of the marketplace.
What is the speed of growth in Nigeria?
There’s healthy growth, but there’s a lot of potential growth. There’s a lot of irrational behaviour going on in a lot of our marketplaces. You’re seeing third, fourth, fifth, sixth in some cases eighth entrants coming in, all competing on price, and that’s unsustainable. You see customer numbers growing very, very significantly, but these are triple and quadruple-simming customers, so we are concentrating on customer value, share of wallet and retention, and using products like ZAP money transfer, loyalty programmes to retain our customers and grow the share of wallet.
So in some marketplaces in South Africa, you’ve seen it Kenya, their market is actually shrinking in terms of the number of customers. That is because carriers are now focusing more on share of value rather than growing customers, so you’re seeing the industry shift to value, and that’s really what we’re focusing on.
Are you finding it more difficult than you would in a European market?
You’ve got to focus on the customer’s perspective. Many of the carriers focus on technology and say we’re the best 3.5G or we’re the best 3.75G network or we’re rolling out WIMAX, or we’re doing this or we’re doing that, but in actual fact it’s more about understanding the customer, understanding their wants and delivering to those wants in a very, very simple, relevant and affordable way. That’s really our focus – segmenting the customer base, understanding what they really need. You’ve seen ZAP, M-Commerce transforming people’s lives. You’re turning out telephony to rural and remote areas that have never had telephony before, and you’re transforming people’s lives.
ARPUs in Africa are predicted to decline. How do you plan to make a profit from that growing pool of customers with less money to spend?
It’s looking at the value of the customer, and getting a greater share of wallet. So we put loyalty and retention schemes in place so that customers that use our services more gain loyalty and rewards. With ZAP M-Commerce, we see that more as a retention tool, rather than as a revenue-generating tool. Because like us, if you’re with a bank and you have a mortgage and a credit-card and a bank account, if some other bank comes up with a better offer, you’re less likely to move because it’s too hard. So the more we can actually engage our customers, and the more products and services we can give them and package and bundle them, the more likely they are to stay with us.
Will the remittance market become bigger than the inter-African market for ZAP?
The future is what we want to create. And we see the mobile phone replacing the wallet. A lot of transactions are done in cash in Africa, and there are security risks associated with that. Coca Cola for example is one of our customers, and their [operators] used to drive around on a two-week trip, selling Coca Cola, collecting cash, which had a lot of risk. Now it’s all done on ZAP so it takes away that cash risk.
People are paying for petrol in Uganda on ZAP, paying for restaurants, paying for their school fees, paying for electricity, paying for their water rates, paying for al these type of things.
We have over 10m [people] ZAP enabled, predominantly across East Africa, and over 1m customers actively using it on a regular basis to do their transactions.
How much has Zain invested in Africa since 2005?
We’ve put in over $12bn in Africa since we’ve been there. We continue to actively invest in infrastructure, in capital, in systems, in people, in capital, in development in CSR, in a lot of things. And we’ll continue to invest.
The model is changing from the carrier that is exclusive, gold-plated networks, the Rolls Royce of everything and owns everything, to a collaborative model where there’s a lot more sharing and you differentiate on your value-proposition to the customer. Our spend in 2009 will probably be between $1-1.5bn in Africa. Again that’s across a multitude of different things.
So far, passively we’re sharing about 1,400 of our base station sites as we speak, and in terms of a capacity on a local, geographical basis, we are sharing and swapping capacity where it makes sense. What we are in the proposal of doing is looking at creating tower-companies, shared infrastructure companies, at perhaps arms-length where perhaps two or three different carriers come through, we pool all of our assets into a third-party company and invest. Those discussions are on the table.
What do you see as the challenges for the telecoms market in Africa in 2010?
Obviously the economic situation is a challenge, foreign exchange, inflation, irrational price competition, opportunistic behaviours by regulators and governments issuing more licences to get short-term income. We see them as opportunities rather than anything else. I think educating and changing the mindset of carriers, regulators, and governments around collaboration around partnerships, around new ways of doing business, and getting out of the mindset that they have to be all things to all people and own networks and what have you, that’ll be an evolution.