Bloomberg News

Scangroup’s Thakrar Sees Digital Expanding Most Over 3 Years

November 02, 2012

Scangroup Ltd. (SCAN) Managing Director Bharat Thakrar said the digital advertising division of the marketing company, East Africa’s biggest by sales, will record the fastest rate of revenue growth over the next three years.

Revenue doubled in the first half, boosted by the use of mobile phones by people 18 years old to 35 years old, he said yesterday.

“The reason it is going to be the fastest growing is because of the mobile penetration,” Thakrar said in an interview in the capital, Nairobi.

Mobile-phone companies and handset manufacturers, which account for half of advertising expenditure in Africa, will remain the biggest spenders for the next three years, Thakrar said. There were 29.2 million mobile-phone users in Kenya by March 31, according to data from the Communications Commission of Kenya.

Beverages, banks and communication companies account for as much as 70 percent of advertising expenditure and will keep that pace for the next three years, Thakrar said.

Middle Class

“There is growth in the middle class and where do they spend their money?” he said. “Look at our fast food outlets and coffee houses, sodas, phones.”

Kenya has more than 40 banks and four mobile-phone companies including Safaricom Ltd., (SAFCOM) which is 40 percent owned by Vodafone Group Plc. (VOD), Airtel Networks Ltd., the domestic unit of Delhi-based Bharti Airtel Ltd. (BHARTI), France Telecom SA (FTE) subsidiary Telkom Kenya Ltd. and Essar Telecom, the domestic unit of India’s Essar Group.

Kenyan companies usually spend 45 percent of their advertising budget in the first half and 55 percent in the second, Thakrar said.

“Second half is always bigger than the first half,” he said. “A lot of people are running promotions during the end of the year, so they spend more money.”

Advertising spending in Kenya surged 43 percent in the first half of 2012 to 40.1 billion shillings, compared with the same period a year earlier, according to Ipsos-Synovate, a Nairobi-based market research firm.

Scangroup’s clients include Safaricom Ltd., Reckitt Benckiser Group Plc. (RB/) and Coca-Cola Co., who are among Kenya’s top five advertisers, Ipsos-Synovate figures show.

Nigerian Expansion

Scangroup’s net income climbed 8.5 percent to 406.6 million shillings ($4.76 million) in the six months through June from a year earlier, while billings grew 5.9 percent to 5.94 billion shillings.

Scangroup, which is 33 percent owned by WPP Plc., (WPP) the world’s biggest communications company, on Oct. 24 appointed Rufai Ladipo, who was head of STB-McCann, as chief executive officer of its new operation in Nigeria.

“The downside with green field is that you have to carry cost for some time,” Thakrar said. “It is the right thing to do. An acquisition would have probably cost us a lot more.”

Shares in Scangroup closed trading unchanged at 60 shillings. The stock has rallied 45 percent so far this year, outperforming a 34.2 percent surge in the Nairobi Securities Exchange All Share Index (NSEASI) in the same period.

To contact the reporter on this story: Eric Ombok in Nairobi at eombok@bloomberg.net.

To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net


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