Mobile boom in Africa a boon to ad agencies

August 31st, 2008 in Online Marketing- International

By Eric Pfanner

PARIS: Drive around Nairobi these days, jokes Michael Joseph, chief executive of Safaricom, a Kenyan mobile phone operator, and every building is painted in his company’s color, green, or that of one of its rivals.

That is a bit of an exaggeration. There are still a few ad-free walls left in Nairobi, and a few advertisers outside the mobile phone industry.

But both are becoming scarcer. Outdoor advertising is one of the biggest marketing media in Kenya. Mobile operators are already the biggest spenders, and their outlays are set to rise as several new players enter the market.

“It’s the kind of spending that in the past has been associated only with cigarette brands or Coca-Cola,” said Michael Foley, who runs the East African operations of Essar Group of India, which is backing a new wireless network that is scheduled to begin operating in Kenya by the end of the year.

A boom in mobile use across the region has attracted a flurry of investment from Africa and abroad. And as competition heats up, the mobile business is turning into a bonanza for advertising agencies, too.

Perhaps no country better illustrates this than Kenya. For years, the mobile business there has been dominated by Safaricom, a local company whose biggest shareholder is Vodafone. Safaricom has a market share of about 85 percent, with most of the rest held by Zain, an operator based in Kuwait with networks throughout the Middle East and Africa.

Zain and Safaricom will soon be joined by two newcomers. In addition to Essar, France Télécom, which recently acquired a controlling stake in Telkom Kenya, is building a new mobile network that it plans to market under the Orange name.

Meanwhile, Zain this month rebranded its wireless networks in 14 African countries, including Kenya, where the company was operating under the Celtel name.

Telecommunications companies are expected to spend about 4.7 billion Kenyan shillings, or $72 million, on advertising this year, about 30 percent of total ad spending in Kenya, according to Business Daily, a newspaper based in Nairobi.

Safaricom alone accounts for 2 billion shillings in spending, according to the paper.

Given its dominant position, Safaricom plans no new directions in its advertising, Joseph, the chief executive, said. The company’s current ads, created by RedSky, an agency based in Nairobi, include pitches for a promotion in which customers can win prizes by calling more often.

“We intend to be very aggressive in the marketplace to make sure our brand stands out,” Joseph said.

Access Leo Burnett, also based in Nairobi, was recently appointed by France Télécom to introduce the Orange brand to Kenya. It has a tougher assignment, since the name and network are new to the country.

The agency, which is affiliated with the Leo Burnett division of Publicis Groupe, based in Paris, plans to align the brand with the international “positioning” of Orange, said Annette Martyres, managing director of Access Leo Burnett. France Télécom recently introduced a new ad campaign, developed by another Publicis agency, Fallon, under the theme, “Together we can do more.”

The agency handling the rebranding of Celtel to Zain - ZK Advertising, part of a group based in Tanzania - also faces a challenge, given that Celtel had been losing market share to Safaricom. Antoine Aboukhalil, a Zain spokesman, estimated that the company spent about $10 million on the rebranding alone.

Essar, meanwhile, said it planned to introduce an entirely new brand name when Econet Wireless International, a company in which Essar holds a controlling stake, starts its new network. Foley declined to say what that name would be, but he said the company’s marketing, developed by the Ogilvy and Wunderman units of WPP Group, would be aimed at users aged 14 to 35.

Mobile industry executives see plenty of room for growth, given that only about 35 percent of Kenyans have mobile phones. Across Africa, many callers use pay-as-you-go services, rather than subscription contracts, so markets can be highly fluid, with many customers switching carriers.

That has helped drive the high levels of ad spending, which has agency executives in an upbeat mood.

“There is tremendous potential,” Martyres said. “The growth of the industry has been huge. Everybody wants to own a mobile phone.”