A Tale of Two Telcos

By Georgas Janata |  October 6th 2020 at 9.45 GMT +0300

Telephone booths in Nairobi. Source: Nation Media.

Shenzhen, China – 1987

1980’s China was an alphabet soup of market socialism – caught up in the chrysalis state between the overthrow of communism and the realisation of capitalism. Mobile communication was nothing much – 1G radio towers listening to analogue signals from 4kg handsets and joining up with a cell phone system to relay much crackle and static…and some voice in between. But still, it played its role in Opening the Door and pulling the bamboo curtain a chink wider.
To the country’s southwest, deep in a rural fishing village named after the deep drains which form patterns of intersecting lines across the breadth of its paddy fields; something stirred. A worker bee quit her hive, but set up an apiary. A candle blew out, but a lamp turned on.
Bending his forties, Ren Zhengfei, one of the most deified of the first generation of Chinese entrepreneurs dropped his day job like a used napkin, and set up Huawei. With it, the promise of life after Talk and Walk – the internet of things (IoT), Big Data, and all things motherhood and apple pie – grew into a distinct possibility, as 5G became a thing…three decades later.

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Nairobi, Kenya – 1987
1980’s Kenya was a cauldron of unbridled optimism and vaulting ambitions – caught at the monstrous disjuncture between hope and glory, but held back from making the great leap into modernity by crony capitalism.
While Ren Zhengfei was pulling on his wetsuit to take a dip in the Big Tech pond, armed with only US$2,500 in start-up capital; a $5.3m telecommunications manufacturing plant was coming up in Kenya, 8,000km away. To the country’s north-west, beyond a soda ash lake, pre-historic sites, and diatomite mines; the Gilgil dustbowl would add more claim to its fame as the only site south of the Sahara that had the technical heft to export original Telco equipment to the West. Even AT&T, which had a 76% share of the US long distance market in 1987, would take a number, and get in line…for that equipment…
At the monstrous disjuncture between hope and glory, Joybell C whispers, “That spark you felt ignite inside you, that split-second vision that you had of yourself bright like the Sun — believe that! Believe that”…

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The year now is 2020. In Good Omens, Neil Gaiman writes that “The future came and went in the mildly discouraging way that futures do.” At the monstrous disjuncture between hope and glory, the vaulting ambitions of the Kenyan Telco turned out to be all froth and no substance. Saddled with a debt pile of more than $12.2 million (Ksh900m), it soon was privatised, and later fell at the drop of the auctioneer’s hammer. Not even those with an eidetic memory possess a winking understanding of what became of it, subsequently, following its 2006 sale to Naguib Sawiris’ Orascom Telecoms Holding. Orascom, the most capitalised firm on the Cairo and Alexandria bourse, would later be bought by Veon, a Russian Telco, while Naguib would go on to become the 9th richest man in Africa with a $3B fortune.
Meanwhile, deep in a rural Chinese fishing village named after the deep drains which form patterns of intersecting lines across the breadth of its paddy fields; a caterpillar spun itself into a silky cocoon, fluttering out of its protective casing, in a whirl of colours and delicate beauty, as a butterfly. From a rural-based sales agent of a nondescript Hong Kong entity, Huawei now packs billions of dollars of revenue in its punch, with global leadership positions in the telecommunication equipment and smartphone markets. The eagle flies as if it never remembers it once was an egg!

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One stream of the strategic management praxis views the firm-level VRIN resource as the meat and potato of competitive advantage (CA). Diagnosis of key changeability symptoms, based on the Ansoffian paradigm, suggests an environmental turbulence level of five. Emerging consensus among those paid to wonder is that while the RBV may only generate transient CAs; sensing, seizing, and transforming capabilities induce more permanence into the CAs, particularly within the surpriseful context of the level five turbulence.
Inspired by the structure-conduct-performance (SCP) paradigm, the other stream of strategic management praxis places the market structure at the nub and core of the firm’s CA, and makes a declarative statement that the permanence of the firm’s CA is bound, hip and thigh, to its monopoly position.
While the monopoly status of the Kenyan Telco extinguished it, the lack of monopoly status for Huawei inflamed it. The Kenyan Telco withered in spite of its fibrous roots tapping into the rich humus of lucrative export markets, but Huawei flowered in spite of its focus on rural markets. Comparatively, the Kenyan Telco had an embarrassment of riches, and better access to network member resources; but lost the race even before the starter pistol had fired.
I do not know whether to conclude that the tale of two Telcos reflects the triumph of RBV over the SCP. What I do know however is that one would have been tempted to cut the Kenyan Telco some slack, were its misfortunes the sad accident of overplaying its hand like a gambler…but no, its politically-inspired, long-serving boss chased the Telco down the rabbit hole of graft, and allowed financial rot to grow like a pernicious weed.
At the monstrous disjuncture between hope and glory, the Kenyan Telco no longer feels the spark ignite inside of it…it no longer flies high like a bloody banner…that split-second vision that it had of itself no longer shines bright as the Sun…at that monstrous disjuncture, its vaulting ambitions have turned out to be all froth and no substance… and so today, having conquered the paddy fields of the rural enclave from which it sprung, Huawei marches down the silk road and economic belt to roll out its 5G network in Nairobi.