#OutToLunch Airtime agency business model is broken

By Denis Jjuuko

So people now pay more money beyond the value when they buy scratch cards? I hadn’t noticed but then again a telco issued a statement saying technically don’t buy from our agents, load money and buy from us directly. It is a business issue partly caused by the ever changing technology.

Back in the day, airtime was a very fast moving consumer good (FMCG). So agents would get 4% on every thing sold. So if you invested Shs1 billion in airtime, you would get Shs4m from which to pay workers, rent, security, interest on loans, and everything. I think it wasn’t such a bad thing as super agents I am told would sell airtime worth a billion a day! I doubt there are many such agents today.

Then pakalast, mega bonus and the like were introduced. Somebody who was buying airtime worth Shs5k a day now was spending Shs1k a day. The number of people buying airtime a day dwindled. And with a struggling economy, those who were buying Shs1k a day now started buying less and less and make calls when it is absolutely necessary.

There was a time I disconnected one of my lines because some people would call me several times a day to tell me absolutely nothing. I rarely these days receive calls which are just for just. Most people who call me have a real reason they are calling not to ask me whether it is raining where I am.

And of course mobile money which telcos are now encouraging ate into the agent’s profitability and at the same time made telcos super profits. That is why today unlike in 2000 or 2005 can wake up and say, forget those agents. Buy directly from us using mobile money. Airtime as sold by agents is no longer a fast moving consumer good. That is why the guys who are selling you airtime are charging you beyond the value. And I am thinking telcos still give 4% to agents, which actually maybe less to the kiosk guy. There is some explanation related to VAT of 18% and the like. That wouldn’t be much of a problem anyway if the numbers were still that super good.

The internet and specifically platforms like Whatsapp also affected airtime sales. If you chat with somebody by SMS text, you are charged Shs100 on average on the same network. In 10 such messages, you have used Shs1,000. If you used Shs1,000 on my network to buy data, that is 60GB. I can send as many as 1000 Whatsapp messages and they wouldn’t be simply plain text. I would download some photos and videos. Update my status across many social media platforms, send emails and still have data to call a friend abroad. Previously, if I need to call a friend in Maryland, Tokyo or just in Rwanda, I would spend Shs10k in a few minutes.

And by the way, there are some apps if you used them to buy airtime, they would even pay you some money back. In order for them to get numbers, they share their commission with their subscribers. They can afford to do that because they don’t have the overhead costs of the mortar and brick airtime agent. When I go to some of these super agents today, I rarely see people lining up to get airtime as it used to be. It is usually mobile money or mobile devices people are interested in.

And as mobile money and other digital options develop, there will be no need to buy airtime scratch cards or even from agents anymore.

So the airtime agent business model regardless of who pays VAT is broken and the telcos have no empathy to increase the percentage given to agents. It would be wrong to expect them to do that, they are a business not Mother Theresa.