Kabaka Ronald Muwenda Mutebi launched K2 Telecom on 31st December 2012 at Buganda Kingdom’s annual end of the year event, Enkuka. With all the exultation from the attending crowd, and the loyalty of the 8 million Baganda, K2 Telecom looked like it was headed for the good times. However, its time in the market didn’t get a fairly tale ending. I can confirm that Airtel Uganda and K2 Telecom signed a brand endorsement agreement. Consequently, K2 subscribers will enjoy all services offered by Airtel Uganda. But how did it get to this?
In Uganda’s Telecoms sector, a company needs numbers to break even in a given period of time, lets use 5 years as a benchmark for a telco to have broken even even though this is probable. K2 counted on the loyalty of the Baganda to their Kingdom to attain that number just a year after launch and that didn’t materialize. Think about it, 80,000 subscribers after a month of launch, and then failing to break further into the market five years later.
The big Announcement: Airtel Uganda and K2 sign Brand endorsement agreement.
Airtel Uganda took to their official Facebook page to announce the brand endorsement agreement with K2 telecom. The Smartphone network posted:
“This afternoon, Airtel Uganda and K2 Telecom will sign a brand endorsement agreement that will see K2 subscribers enjoy all the services offered by the #TheSmartphoneNetwork.
This announcement will be made at a press conference happening now at Bulange Mengo attended by our officials led by the Managing Director Mr. VG Somasekhar and Buganda Kingdom officials led by the Katikkiro of Buganda Charles Peter Mayiga.”
Airtel’s past Acquisitions.
Whereas this is more of a patnership, Airtel has been quite busy in the past. Bharti Airtel has a huge appetite for ailing telecoms, or those that just wanna sell off.
In 2010, Airtel took over Zain Telecom for $10.7 billion in what would become the largest ever telecom takeover by an Indian firm. This made Bharti Airtel the world’s seventh largest mobile operator with a total subscriber base of about 179 million.
In 2013, Airtel signed an agreement to acquire the operations of Warid Telecom Uganda. By this time, Bharti Airtel was the fourth largest mobile phone operator in the world. The Warid acquisition brought competition MTN Uganda since the two were now neck to neck in subscriber numbers.
K2’s problems could have given it no choice but to sign.
Three years after the launch, K2’s network started dying off. The few that had picked up interest in the telecom (maybe because of loyalty to the kingdom and not what it had to offer) started tucking away K2 SIM cards safely out of their devices.
K2 Telecom operated as a Mobile Virtual Network Operator (MVNO). Consequently, it depended on other networks to deliver telecom services. However, counting on others to deliver your own services comes at a huge cost of paying a significant part of the revenue to the partnering telecom. K2 couldn’t survive on its estimated 200,000 subscriber base to cover up the expenses and still make a profit in a highly competitive market. More so, only 50% of its customers were estimated to be active.
Cash flow challenges have led to the exit of new entrants in Uganda’s Telecoms business like Vodafone Uganda. No one survives that fate, especially if you have no back up. Airtel Uganda made its first profit in 2017, but it operated a cushion of one of the largest mobile phone companies in the world, Bharti Airtel.
K2 lost the trust of retailers who had stocked K2 products during the hype period. However, they were soon hit by an ugly reality of slow-moving sales . Most of them stopped restocking K2 products, and others closed shop. Business was slow for K2 products.
K2 seems to have died off years back. Please don’t check their Facebook page, it was last updated sometime in November 2017, and then lastly in February. The last time K2 Telecom made headlines was when URA closed down their offices over a UGX 94 million debt.
The build up?
For quite some time, Airtel has been establishing ties with Buganda Kingdom, and not K2 Telecom. This has been in the form of Sponsoring Kabaka’s Birthday celebrations and Masaza Cup. Airtel has since won the hearts of many loyal to the Kingdom. Consequently, K2 Telecom lost out a chunk of Kingdom loyal customers to Airtel which seems to have close ties with Buganda.
Will this save struggling K2 Telecom?
It is the telecoms business, where speculation over mergers and and acquisitions is always rampant. Whereas they preferred to call this a partnership, it looks more like a take over.
K2 Telecom subscribers have been assigned a “0708” code, which belongs to Airtel’sformer “wife”, Warid Telecom. However, the SIM cards will still have K2 telecom branding although sold at Airtel shops.
For starters, K2 Telecom subscribers are going to enjoy all services offered by Airtel Uganda. Now that’s the best part. Airtel has a wide array of offers. From juicy Data Blaster bundles and My Pakalast bundles to Kwese iflix offers and Offer of the day. Imagine all that on K2. Sweetness.
The major constraint to K2 Telecom business might is a limited customer base. This makes it hard to raise revenue to pay off partnering telecoms that help it carry its services to the customers. However, with all tempting Airtel services added to the menu, this might increase its customer base. And subsequently, its revenue inflow might as well increase.
K2 Telecom subscribers will also benefit from Airtel’s countrywide internet availability, Airtel Money and 4G internet. The Internet business is one of the profit cows in the Telecommunications sector.
K2 Telecom may technically be no more, but this agreement brings so much to existing K2 telecom subscribers. Those that kept away from the service because of its well socumented problems have a change to get a K2 branded SIM card. Maybe now is the right time to get your K2 SIM cards back into the phones. Your menu just got bigger and succulent.
