Three years ago, the team sent by France Telecom to run its newly acquired business in Kenya misread the local market and stumbled dangerously in the first three years of buying Telkom Kenya for $390 million.

Today, after staging and winning a major and important fight to level the competitive landscape against the domination of Safaricom in the mobile voice business, and winning major concessions from the government, rivals are starting to take note of Mickael Ghossein and Telkom Kenya.

Mr Ghossein is upbeat as he is plotting a comeback for Telkom Kenya. This is a second act that could see Telkom Kenya correct its strategic missteps in capturing and dominating the data market that is expected to be worth $500 million in five years.

Safaricom too wants to dominate this market as profit margins in the voice market comes under increasing competitive pressures and regulatory scrutiny. Reacting to Telkom Kenya’s potential to dominate the data market, Safaricom has been on an acquisition spree. Running the national fibre backbone and controlling huge stakes in Eassy and Seacom consortiums will make Telkom Kenya a major player in the broadband wholesale market in Kenya and by extension to the region.

However, according to Mr Ghossein, Telkom Kenya plans to move beyond the wholesale and radically change the way Kenyans access Internet and data services at home and in their offices by leveraging the infrastructure it has been given by the government.

Superfast Internet

This will see home users accessing superfast Internet connection speeds on their mobile phones and on their home networks. He talks of leveraging the fixed network as a cable channel carrier, providing consumers with cheap fixed wireless phones and generally keeping Kenyans hooked to the world with devices such as iPads and Kindles.

This was the original plan—and still the strategic--that the team that came from France Telecom to run Telkom had in mind when they came to Kenya. But things did not work out as planned, which resulted in Safaricom entering and shaking up the mobile data market in a big way.

In 2007, in a world awash with easy money and blurry-eyed optimism, France Telecom paid $390 million to buy 51 per cent stake in Telkom Kenya, in a bid that valued Kenya’s deeply troubled firm at $780 million. Privatising Telkom Kenya was such a politically messy and emotionally charged affair that had taken nearly a decade and cost taxpayers $1 billion in assumed burden to the national debt.

Expansion into Africa

Energised by the parent company rapid expansion into African markets Dominique St Jean and Peter Reinartz, France Telecom men on the ground — serving as CEO and his deputy — anticipated an easy time winning market share in Kenya. After all, going by conventional business wisdom, it was inexplicable that Safaricom held 70 per cent market share in the voice market.

In interviews with reporters, Mr Saint Jean anticipated that France Telkom would break-even by 2010. So optimistic was the team that in strategic plans shared with board members, the team anticipated that it would lift the revenues from around Ksh10 billion at the time they were taking over the business and by 2013 it would be making Ksh42 billion.

Most of this growth was to come from two businesses that Telkom was launching from scratch under the Orange brand.

This was the mobile business, which would bring revenues from voice. Then the data business. By 2010, the team anticipated it would have grown its mobile phone business from zero to Ksh6.1 billion and data and Internet revenue would bring in Ksh6.4 billion and revenues would top Ksh18.5 billion.

By 2013, revenues would top Ksh42 billion, with mobile voice bringing Ksh21 billion and data and Internet bringing in Ksh17 billion.

It is instructive that France Telecom saw no future in the fixed voice business that was the mainstay of the firm before mobile phones. This business brought Ksh18 billion annually, but the new owners anticipated that it would stagnate at $50 billion.

In the mind of France Telecom, the Kenyan telecoms market, which was estimated to reach $2.2 billion in revenues by Pyramid and HSBC by 2013, was up for a revolution. The success of this revolution would come from dislodging the market dominance of Safaricom by eroding its market share from 80 per cent to 60 per cent.

In this new configuration, Orange would control a fifth of the voice revenues in the market. Then, France Telecom would launch a major offensive to control 57 per cent of the residential and corporate Internet market. This did not happen as Safaricom launched a major defense.

Today, one year on the job since Mickael Ghossein, replaced St Jean as CEO, he faces a tough market where he has to meet these lofty goals.