Constraints in setting up in a foreign country

Essar will be unable to tap into the growing number of subscribers, especially businessmen and executives whose dealings cover the entire East Africa region.
The brand name YU is strategic in that context. The group had initially thought of using the Essar brand name, but changed its mind as it needed a brand that will cater to regional aspirations, especially in a multi-cultural and multi-linguistic region like Africa (the population in many countries like Congo, for example, is predominantly French-speaking.). YU is a generic name in that context, and has an instant customer-connect whichever part of the world you are in. Besides, the color of the letter will change in tune with the color of the flag in that country. For Kenya, the colors are red and green.
Analysts, however, say the process has to be much faster if YU has to make a real impact as the subscribers of rivals Safaricom and Zain can already make or receive calls in neighboring countries using their number and home tariffs.
More than what rivals are doing, Essar wants to cut costs and pass on the benefits to the subscribers — something the Indian market saw a few years back. The seamless networks will be strategic for subscribers by reducing the call charges across borders. This is the lesson the team has learnt from its Indian experience — the price game.
YU has close to 700,000 subscribers in Kenya, an insignificant number in a country that is the biggest economy in East Africa with a population of 38 million, but Essar expects to double that number before March 2010, ahead of initial forecasts. That’s because the mobile penetration rate, which is only around 30 per cent now, is forecast to touch 70 per cent in another three to four years.
That will happen through competition in a country where fixed market was a monopoly and mobile market a duopoly till as recently as 2007. Though the Indian market saw competition much before, the similarities are unmistakable. So a right pricing strategy has to be the key for Kenya’s fourth telecom operator. YU has snapped up a number of subscribers through a special low tariff for the first two minutes of a call. That’s the kind of pricing that will help YU to reach out to the rural markets, which will be the key battlefield going forward.
YU has also launched its prepaid mobile internet services at one of the lowest rates in the marketplace. The interesting feature of this offer is that there is no bundle required to access the rate and is seen as a cost-effective pay-as-you-go service that would make it appealing to most Kenyans.
Besides the cheaper call rates, the company launched free intra-network SMSes. This is a first in the country and could significantly drive up the uptake of its services. Besides the network expansion, the YU network has also recently unveiled a variety of value-added services which includes Dunda — a distinctive caller ring back tone service which allows one to pick up to 5 tones for different people and Eneza, an electronic top-up service that is completely paper-less for loading airtime. The network also has a convenient, unbundled data service which allows YU subscribers to pay for their data downloads as per consumption at the most affordable rate in the country.
The clear customer segmentation model lays ground for YU to challenge market leader Safaricom in the next two years.
Those are brave words, but many analysts say Essar is in for a long haul in a market where three of the four operators have a combined market share of just 20 per cent. Safaricom has an overwhelming leadership with 80 per cent market share, earning around 60 per cent of the telecom revenue in that country. Also, Essar’s expansion in other markets may be tough. For example, Uganda already has four mobile networks up and about and the jury is out on whether or not the market can sustain a fifth entrant.
They are small but are new as the latest entrant, YU doesn’t have a baggage and hence has a significant cost advantage in producing air minutes much cheaper than its competitors. They expect to consolidate and may get better.
Africa is the final frontier for the world’s two emerging powers, China and India. While India has had strong business links for ages, China has muscled its way in during the last few years. —