Vodafone plc subsidiary, Safaricom shareholders crisis 2005 Essay
The new Kenyan regime in 2003 commenced implementation of strategic policies on economic reforms and privatisations of state corporations. There was need to realign corporate management and to overt the basic units of company shareholding structures so as to permit privatisation. Munene K (2004): The Standard: The mega scandal in the Kibaki administration privatisation plans. [June 20, pg8]. This regulatory policy was effected under the ministry of finance and was passed through and implemented by the investment secretary so as to effect these regulatory recommendations.
The investment secretary and the capital markets authority had to have a complete overview of the shareholding structure of the company so as to allow the initial public offer that would have seen the government stake in the corporation sold to the public. Muna W (2004): Daily Nation: The CMA regulations affect Safaricom IPO prospects [www. nation. com]The company registration and shareholding structure was made available to the government and there was a serious implication on the structure to the IPO in the offing.
According to the shareholding structure a 5% stake of the company was owned by a United Kingdom registered consortium Mobitelea contrary to public belief that the government of Kenya and the United Kingdom
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The company in the middle of the controversy certainly would attribute the damage of the parent company ‘Vodafone plc’ international reputation to come tumbling down, force a stock depreciations and a corporate crisis at the end. Joe A (2005): The East African: The mystery owners of Safaricom [Dec 11-17, pg3] The preceding events forced the company and the stake holders, the government of Kenya, Vodafone plc and Mobitelea to agree on postponing the IPO so as to avert a crisis.
The capital markets authority and the investment secretary agreed on modalities to shelve the IPO so as to pre-empt media hype and political-diplomatic problems between the UK and the Kenyan governments. However the anxiety within the investors and the media hype already had made effects on the situation and there was continuous general public uproar on the graft level within the state and the identity of the third shareholder. The issue was of great measure and the magnitude forced Safaricom to commence using public relations to clear it image. The Mobitelea consortium was connected with the former corrupt and dictatorial regime.
According to analysts the 5% was a very substantial stake and was worth billions of Kenyan money. Mwaura K (2006): ICT News: The ripples of the Mobitelea shareholders on Safaricom. [ICT News Vol 107, pp 7] The crisis began to bite when the customer response to the scandal became hostile. There were some resignations and the subscribers began using less of Safaricom s mobile telephony services and preferred rival Ken-cell. The profits began to come and down and the human resource began a very technical lay off program for some off-the –office corporate projects.
Executives who sold the company products and were paid by the company were laid off and given the shops they were selling from to run but to buy the stock from the company. The lay offs were followed by radical corporate decisions which saw the company cut cost of making calls so as to appease the subscribers. Subsequently, the company created new tariffs for the subscribers so as to have a diversified choice. Vodafone was on the spot for being the chief architect of the Safaricom inception and the sale of the 5% stake to Mobitelea. The whole situation drew out Vodafone plc as a villain.
They had sold the 5% to Mobitelea so as to get a license in Kenya. Alari O (2007): All Africa; Committee wants Safaricom 5% owners investigated. [August 10. www. allafrica. com] The effects of the crisis Uproar in the general public which is the backbone of the company’s economy is perceived as a major blow and was a major blow to the company. The community espouses the services rendered quite ambiguously and the perception of graft within this conglomerate was comminatory to their coherent use of its services. A diverse resignation of customers from using the company services (buying airtime and making calls) became apparent.
There were huge corporate losses and the management and the board rapidly sought affable solutions. The Kenyan government was applying convectional pressure on the company to ease the crisis but the UK authorities warned of political-economic repercussions if the identity of the Mobitelea Company was unmasked. Kenya blamed the United Kingdom of being dictatorial and imposing itself on the government. There were diplomatic rows as British envoy criticized Kenya of corruption and the Kenyan cabinet told of the UK and made it clear that it was the UK that was the perpetrator of corruption in Kenya.
Raila O (2007); Balancing the Act News [August 25, pp 5] Safaricom experienced losses due to decrease in sales after most customers opted to use the rival Ken-Cell. This diluted the strength of the Safaricom market share, drastically reducing it. There was forced resignations at the board of directors so as to ease the corporate burden and strategic lay offs to offset cost management and avert fiscal crisis. Those employees who were based on the field were laid off but offered the titles of authorised dealers. The upheaval was nascent and the effects were much diversified.
This was most adverse in its span since its inception as a state owned mobile telephony service provider and part of the foreign direct in vestment in Kenya. Kennedy S (2006): Smart Company. Silent losses at Safaricom [Smart Company. www. nation. com] Management of the crisis Ogilvy PR to check on the company public relations The company, its parent company and the two governments are seen to make inroads to avert the collapse of a conglomerate that is raking in billions for the state. Initially the CEO Mr Michael Joseph advised on keeping the issue under wraps through gagging the media from hyping the issue.
Safaricom board agreed to a public relations counter measure and used a spokes person policy. This policy is not personalised to a mere individual but its through a corporate relations aspect that was tasked by Ogilvy PR to check on the company public relations while there is also advice coming from a company called Saatchi and Saatchi. This measure is seen to level the publicity projecting the company as one that espouses the community as its basic unit, hence, downplayed the allegations of graft and embezzling of profits by a consortium of former corrupt moguls.
Media hype For about a month, the media hype on investigations being carried out on establishing the identity of the Mobitelea directors is literary consequential. The projections that UK laws are difficult and tantamount to avenues of corruption are seen as a dangerously careening diplomatic time bomb. The Guernsey laws as the UK government states cannot be changed just to justify a case of a small storm in a tea cup. The media hype shift from the UK to the Kenyan corruption issue and the players in corrupt deals, is unilateral damage but the measures took effect.
David J (2005): Goldman intelligence. The Safaricom complex and political implications in the UK and Kenyan government and the players [Vol 75, pp 3] Ogilvy worked on the most intrinsic areas of the crisis. Erstwhile, it checked on the balances of the strength of this crisis to besmirch the company corporate activities and its market share and products equity in the market. The stemming of the media hype paid off the identity of the Mobitelea directors was kept secret and the diplomatic row between Kenya and United Kingdom played down.
This is essential communication and management protocol that plays down the level of the corporate governance and foreign investment loss incase Vodafone plc insinuated to pull out of Safaricom. Communication Communication shut the apertures that could have adversely forlorn investments in Kenya and stifle possible investor’s interests. Cogency of the measure was effective and the aspect of communication as a blandish crisis measure was intrinsic in value. The essence of strategic corporate policy analysis seemed prevalent and the technocrats from all the sides in the muddle eschewed the scum.
Corporate crisis committee The information demographics and the subsequent disclosure of the level of problematic effects on the stature in general comminuted the problem. There was a corporate crisis committee in place to inform the key player, UK government, Kenya government, Vodafone plc and Safaricom on the implications, steps and outcomes from each move each made. This was the essence of putting a crisis management regulator and rather than the diplomatic row escalating it subsided and all the parties remained affable and commingling.
Outsourcing approach to speak for the company Hiring Ogilvy is one measure to manage the problem and Ogilvy expertise in crisis management was invaluable. Saatchi and Saatchi worked on projecting the company as a very steady investment in the country and advised on improving the brands or services and working on modalities to appease the clientele which was now about to hit a high of over a million and half subscribers. Saatchi and Saatchi spoke volumes about the viability of Safaricom and the diversity of Vodafone services.
The company further projected the issue as a small problem which just an inheritance from the previous corrupt regime. These efforts made great progress and gains. The outsourcing approach is literally an aspect of using the expert advice from the relatively able outside parties. In context it is more effective and applicable for it is convectional and a smart solution. Though it is a fall back position and a transfer of PR risk it augers well in such a case. Crisis management phases The plan of managing the problem is phased into three major phases.
One is to eschew media hype on the issue and projecting Safaricom as a clean and a very stable entity, secondly to manage the crisis within the levels of the major stakeholder through communication, dialogue on the principal issues and thirdly pre-empting the public doubts about the credibility of Safaricom through provisions which make an appeal to the subscribers and up the sales. Corporate culture implications literally made nascent implications on the gains made by the reigning of the crisis.
The major implications are on the corporate level and the executives’ intrepid and cutthroat approach to the market demographics have impact that pummeled the company market share back to its position. The CEO Michael Joseph made it public and clear that Safaricom had nothing to hide. Michael J (2006). Safaricom Press release: Share holders issue. [pp 1] Crisis management protocols The overall facade is that the company and its major stake holders carefully followed the crisis management protocols.
Their approach was very convectional and ousted major crisis phases by rapidly addressing the crisis and clearing the mist to the subscribers through a media approach that, rather than being the main player in further destructing the company image was the element of disseminating the exact corporate situation and position at Safaricom. The response assessment There technocrats involved in this crisis were more of intelligence backed technocrats than mere corporate executives.
The projections made through the PR companies were more or less baked for the purpose of managing the problem partially since it has since then come back to wreak havoc. Conformed partially to crisis management procedures The PR strategy worked effectively and the gains were tremendous, they conformed partially to crisis management procedures and opted intelligence backed avenues more profoundly. Contrary to most crises the speculation on damage was zeroed in and cobbled to a benefit then.
The new products and services appealed and the market share value was attained again. Lay offs were strategic and veiled. The 5C’s were adopted The crisis was not overt and did not make any ethical and palatable effects on the workforce. By the time it was realized there was a problem, the lay offs were already implemented and strategic policies were being discussed. This means the 5C’s were adopted but rather than fully conforming to the doctrines of the same more rapid response measures using government backed machinery were used as well.
Saatchi and Saatchi and Ogilvy to salvage the company image The two companies, Saatchi and Saatchi and Ogilvy salvaged the company image by projecting its value, portfolio and plans while at the same time advised on countering customer rebellion through lucrative offers and services which saw the company gain its corporate position again within the market. Ken M (2005) Goldman intelligence: The inherent graft and the subsequent consequence on diplomacy and economic reforms. [Vol 17, pp 4] Analysis on the crisis management procedure
Most erudite decision made on this crisis was the counter measure through a public relations company to project and protect the corporate interest of the company. There is also the view of technical machination using think tank ideologies which were incepted due to the magnitude of the implications the crisis was having on both diplomacy between Kenya and the UK and the two companies Vodafone plc and Safaricom. However the gains were partial in terms of the time frame in which the solution to the problem was projected.
The problem was not resolved and the identity of Mobitelea was not made available. The efforts using bureaucracy to achieve this was not rationale as per the technical aspect since the owners of Mobitelea did not buy the idea of selling off the stake and making a kill so as to have the mist cleared. David J (2006): Kenyan Corporate ethics: The Mobitelea deal cannot end. The owners refused to make a kill and sell of the stake. [pp1] The PR was a flurry of government orchestrated and planned strategy but a progressive one, the objective as per the plan was reached and served the purported issue then.
Disposition on the issue culminated to talks in house about the 5% stake and how to mask it rather than to overt and dispel more corporate ruin. The failure to forecast the impeding storm in the privatization jinx was not evaluated profoundly hence the re-emergence of the scenario and the fizzling of it again. However the jinx was subsequently swallowed and the fissures will only vent a pinch of the latter often until the entire volcano becomes defunct.
Projections on the shrewdness of the adopted policies and the onslaught on the media and the taming of the media to pet the company affected is indicative of more corporate ethics and very erudite decisions on the corporate edge. Any analytical pretension will surmount the level of bureaucracy and make unnecessary inroads with diversionary views about the handling but the eschewing element and the intellectual potential within the technocratic aspect of the entire crisis is ideologically correct and legally procedural in context.
This is idealized as a model assessment of crisis potential and how to limit the besmirching of corporate strength of a company. In corporate ethics it is insulation against an impeding business storm as in the book Stress for success. Peter G Hanson: (1989): Stress for success. The impeding storms of business insecurity  Bibliography 1-Munene K (2004): The Standard: The mega scandal in the Kibaki administration privatisation plans. [June 20, pg8]. 2-Muna W (2004): Daily Nation: The CMA regulations affect Safaricom IPO prospects [www. nation. com]
3- Joe A (2005): The East African: The mystery owners of Safaricom [Dec 11-17, pg3] 4- Mwaura K (2006): ICT News: The ripples of the Mobitelea shareholders on Safaricom. [ICT News Vol 107, pp 7] 5- Alari O (2007): All Africa; Committee wants Safaricom 5% owners investigated. [August 10. www. allafrica. com] 6-. Raila O (2007); Balancing the Act News [August 25, pp 5] 7- Kennedy S (2006): Smart Company. Silent losses at Safaricom [Smart Company. www. nation. com] 8- David J (2005): Goldman intelligence. The Safaricom complex and political implications in the UK and Kenyan government and the players [Vol 75, pp 3]
9- Michael J (2006). Safaricom Press release: Share holders issue. [pp 1] 10- Ken M (2005) Goldman intelligence: The inherent graft and the subsequent consequence on diplomacy and economic reforms. [Vol 17, pp 4] 11- David J (2006): Kenyan Corporate ethics: The Mobitelea deal cannot end. The owners refused to make a kill and sell of the stake. [pp1] 12- Peter G Hanson: (1989): Stress for success. The impeding storms of business insecurity  13-www. safaricom. com 14-www. nationaudio. com 15-www. bdafrica. com