Starlink casts a financial lifeline to Jumia in new deal

Starlink to leverage Jumia’s retail network to supercharge its broadband rollout in Africa, extending a vital financial lifeline to the struggling online retailer.

SPECIAL REPORT | BIRD AGENCY | The stars may finally be aligning for Jumia after SpaceX’s Starlink tapped the online retailer, once dubbed Africa’s ‘Amazon’ to drive its satellite internet offering across the continent.

Jumia will sell Starlink’s satellite terminals and other kits in some African nations, starting with Nigeria in the coming weeks, and subsequently expanding to Kenya and others.

Jumia will help Starlink sell terminals in areas that especially lack formal addresses and city mapping, areas where traditional broadband infrastructure often falls short, yet the demand for connectivity remains high.

“For Jumia, this venture isn’t just about diversifying its product range. It’s a lifeline, a chance to revive its position in the market by aligning with a high-potential broadband initiative from one of the world’s most ambitious tech companies,” notes market research analyst Martin Macharia.

Despite its initial promising outlook, Jumia battles an ongoing financial maelstrom, having lost US$63.7 million in the first half of 2023, according to recent financial disclosures.

Despite pulling in US$94.8 million in revenues during the same period, the online retail giant is struggling under a net loss, which, albeit reduced, still drags its bottom line into a quagmire of financial instability.

For Macharia, however, the Starlink-Jumia deal could usher in a cascade of opportunities for both entities.

For Starlink, Jumia’s established, albeit struggling, retail network may offer an efficient and swift entry into the African market, sidestepping the bureaucratic and logistical hurdles often encountered when establishing a new tech footprint.

Meanwhile, Jumia could seize the opportunity to revitalise and expand its customer base by tapping into the previously unconnected populations that Starlink aims to serve.

“We are thrilled to be the first company on the continent to join forces with Starlink to expand this groundbreaking technology in Africa. This agreement aligns perfectly with our mission of using technology to improve lives across Africa,” said Hisham ElGabry, group chief commercial office, Jumia.

“By expanding access to Starlink’s internet service through the Jumia platform, individuals and communities can be empowered with high-speed, low-latency internet access, driving economic growth and unlocking new opportunities.”

Francis Dufay, at the helm of Jumia, is expected to use this alliance to bandage the retailer’s bleeding balance sheet.

For Jumia, enhanced internet connectivity directly correlates with increased access to online retail platforms, providing it with a ripe market, hungry for the conveniences of online shopping.

Moreover, the deal could catalyse a shift in the retailer’s financial trajectory by augmenting its revenue streams through potential partnerships and ventures tied to the spread of Starlink’s network.

This could range from offering exclusive deals for Starlink subscriptions to establishing integrated services that exploit the newfound internet connectivity, thereby fostering a symbiotic relationship that fuels both entities’ growth.

Starlink-Jumia partnership also has an edge over traditional internet providers in Africa.

While MTN Group Ltd. and Vodacom Group Ltd. have predominantly supplied Africa’s broadband, challenges persist in extending infrastructure to remote areas.

Consequently, many tech giants have reverted to fibre and sea cables after innovative high-speed internet solutions fell short.

Musk’s Starlink, therefore, employing a vast network of small, user-terminal-communicating satellites, presents a seemingly viable alternative for connecting the continent’s diverse populace.

This year, Starlink has planned launches in Angola, Morocco, Mauritania, the Democratic Republic of Congo, Mozambique and Tanzania.

Following Nigeria and Kenya, Angola eyes position as the third market for Starlink’s space internet.

The Starling-Jumia deal comes on the back of Africa’s budding internet economy, which is is forecast to reach 56% to $180 billion in gross merchandise value by 2025 as paperless retail transactions on the continent continue to rise in the post-pandemic era.

Approximately 144 mobile money providers operate in Africa, with two companies such as M-Pesa, MoMo and Orange Money accounting for a significant share of the market.

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SOURCE: Seth Onyango, bird stroy agency