Cases in Finance – Episode 2 with Enock YEBOAH-MENSAH: “Scale Eats Margin: A telecom lesson every startup should learn”

 SkyConnect Telecom was not just another company. It was the national carrier; the one with history; the one that had wired homes and powered office phones before mobile phones were even mainstream. By the early 2000s, SkyConnect’s mobile arm, OneWorld, carried the weight of a monopoly.

But SkyConnect’s leadership made a critical misstep: they priced their SIM cards like luxury goods. In 2003, a OneWorld SIM could cost over GHS50 ($40 at the time). That price point excluded millions. At a time when mobile connectivity was fast becoming a necessity, SkyConnect treated it as a privilege.

Then came SunWave Mobile in 2006, fresh off an acquisition in the Ghanaian market. SunWave had deep pockets, a youthful brand, and a strategy built on inclusion. Their move was simple: flood the streets with cheap SIMs. At bus stations, music festivals, football games, and market centers, SunWave reps sold SIMs for a few cedis or gave them away for free. For every customer SkyConnect had excluded, SunWave let ten in.

The Economics of Exclusion vs. Inclusion

SkyConnect’s decision to adopt a high-priced SIM card strategy might have appeared rational at first. By charging significantly more for access, the company enjoyed high margins on every SIM card sold.

This approach also gave them a sense of revenue certainty since their customer base largely consisted of wealthier individuals and businesses who could afford the premium cost. However, this strategy was inherently exclusionary.

By targeting only the affluent segment, SkyConnect limited its market penetration. The company failed to build scale, which is critical in the telecommunications industry where infrastructure costs are massive and largely fixed. Towers, call centers, technical engineers, and nationwide maintenance networks all require significant investment.

With only a small number of subscribers, these fixed costs were spread too thin, making the business less efficient and less competitive. More importantly, SkyConnect overlooked the network effect, the powerful compounding advantage that comes when more people are connected to the same system. The fewer people who joined their network, the less valuable it became for potential new users.

In contrast, SunWave flipped this model entirely by pursuing inclusion over exclusion. Instead of prioritizing high margins on each SIM card, the company priced access cheaply, attracting millions of new subscribers across all income levels.

At first, the profit on each individual SIM was small, but the sheer volume of new customers created a much larger revenue base. This allowed SunWave to unlock economies of scale, meaning that the heavy fixed costs of telecom infrastructure were now distributed across millions of users.

As the customer base grew, the average cost per user fell, making the business increasingly efficient. Importantly, SunWave harnessed the power of the network effect. The more people who joined the network, the more valuable it became to existing and potential customers, since friends, family, and business partners were more likely to be reachable within the same ecosystem.

This inclusive approach did not just drive market share; it transformed SunWave into a dominant force, proving that long-term value creation in telecom lies not in high margins per customer, but in mass adoption and sustainable growth.

The Second Act: Mobile Money

By 2009, SunWave introduced what would become its most transformative service: SunWave Wallet, a mobile money platform that fundamentally changed how people transacted.

The true genius of this launch was that it was built directly on top of the massive subscriber base SunWave had already cultivated through its low-cost SIM card strategy. Millions of customers were already on the network, so adoption was natural and seamless.

To further accelerate usage, SunWave leveraged its existing airtime vendors, allowing them to double as mobile money agents. This not only created a vast distribution network almost overnight but also built trust among users who were already familiar with these vendors. The combination of accessibility and convenience meant that SunWave Wallet quickly became embedded in the daily lives of its customers; whether for sending remittances, paying bills, or making purchases.

SkyConnect, recognizing the strategic importance of mobile money, attempted to launch its own wallet service soon after. However, its efforts faltered because the economics simply did not work in its favor. With far fewer subscribers, transaction volumes were too low to generate meaningful commissions for agents. As a result, SkyConnect struggled to attract and retain a reliable agent network.

Customers found the service harder to access, less liquid, and less useful compared to SunWave’s offering. Meanwhile, SunWave Wallet spread rapidly, becoming ubiquitous across markets. Its growing user base fueled more transactions, which in turn strengthened agent earnings, further reinforcing the system. The result was a classic case of a positive feedback loop: SunWave became bigger, faster, and stickier whiles SkyConnect fell further behind.

Today, SunWave commands over 60% of the telecom market, dominating not only in traditional voice and data services but also in the lucrative and fast-growing mobile money space. SkyConnect, despite multiple rebranding attempts, remains a cautionary tale in the industry; proof that exclusivity-driven strategies can deliver short-term gains but often fail against inclusive, scalable models that harness the power of networks and ecosystems.

The Finance Lens: Profit vs. Growth

SkyConnect’s downfall was rooted in a fundamental strategic miscalculation: it chose to protect margins rather than pursue market share. From a finance perspective, this meant maximizing Contribution Margin per Unit (CMU), charging high prices for SIM cards, airtime, and early services to extract as much value as possible from each transaction.

In contrast, SunWave optimized for Customer Lifetime Value (CLV). By lowering barriers to entry through affordable SIM cards and aggressively expanding its user base, SunWave bet on scale, confident that profitability would follow once the ecosystem matured.

The difference in playbooks was striking. SkyConnect’s numbers looked good in the short term, high unit profitability and leaner operations. But the ceiling was low; the company had effectively excluded the majority of potential customers. SunWave’s short-term margins were thinner, but every additional user added long-run value.

As its subscriber base exploded, the fixed costs of infrastructure and distribution were spread across millions, turning scale into both a competitive moat and a financial advantage.

The Universal Truth: Scale Eats Margin for Breakfast

This case illustrates a universal truth in business strategy: scale almost always trumps margin in fast-growing, price-sensitive markets. Every business, whether in telecom, banking, or retail, faces the same fork in the road:

• Extract more from fewer customers (a high-price, low-volume model).
• Or extract less from millions more (a low-price, high-volume model).

SkyConnect pursued the former and became trapped in a shrinking niche. SunWave embraced the latter, building a network so wide and sticky that it became the foundation for entirely new businesses like SunWave Wallet, its mobile money service. In Ghana, SunWave’s success proved the power of inclusion: by making access affordable, it created not just customers but a financial ecosystem. SkyConnect’s cautionary tale underscores how clinging to margins can blind companies to the compounding effects of scale.

The Moment of Clarity: A SIM Is Not Just a SIM

SkyConnect saw the SIM as a product. SunWave saw it as a gateway: to subscribers, to data, to payments, to digital services. That cheap yellow plastic card was not just a chip; it was the foundation of an ecosystem.

Lessons for Startups and Corporates

Price for Inclusion, Not Exclusion

In emerging or price-sensitive markets, affordability drives adoption. Startups should lower barriers to entry, knowing that market share today unlocks monetization tomorrow.

Legacy Advantage Can Become Legacy Trap

Established corporates often rely on historical pricing models. But clinging to “what worked before” can blind leaders to new consumer realities. Disruption often comes from challengers who reset the rules.

Think Beyond Unit Margins

Finance leaders must avoid focusing narrowly on Contribution Margin per Unit. True profitability is often found in scale economics, where a large customer base spreads fixed costs and fuels adjacent businesses.

Customer Lifetime Value Beats First Sale Value

Businesses win when they design models around lifetime engagement rather than one-off transactions. A customer brought in cheaply today could generate revenue across multiple services tomorrow.

Build Platforms, Not Just Products

SunWave did not stop at selling SIM cards, it layered mobile money on top of its network. Startups and corporates alike should see growth as an opportunity to build ecosystems that capture value far beyond the initial offering.

Discussion Questions

1. Was SkyConnect’s high SIM pricing a short-term contribution margin strategy or simply poor market analysis?
2. How did SunWave’s penetration pricing translate into economies of scale?
3. How would you model the Customer Lifetime Value (CLV) of a SIM card in 2006 versus 2010 for SunWave?
4. Could SkyConnect have pursued a hybrid approach (premium mass-market)?
5. For today’s startups, when does it make sense to prioritize market share over profitability?

PREVIOUS EPISODE’S CASE DISCUSSION SOLUTIONS:

1. In financial terms, how can time be modeled as a finite capital resource within a business?

Time can be modeled analogously to capital budgeting constraints — as a finite, non-renewable resource. Each person in an organization has 8 hours per day, just like a company has a fixed capital budget. From this lens:

• Time = Capital Allocation

Leaders decide how to deploy available human-hours (like capital) across competing projects.

• Time Budget = Resource Constraint

Just like a budget limits how many investments can be undertaken, the limited hours in a day restrict how many decisions, meetings, and tasks a leader can effectively handle.

• Time ROI = Value Per Hour Invested

Activities should be ranked by expected return per hour — similar to capital projects prioritized by IRR or NPV.

Thus, businesses should treat time not casually, but strategically — like a portfolio of investments that must be optimized continuously.

What are the risks of over-centralization of time around a single leader? How does this affect succession planning?

Over-centralization of time (i.e., when everything depends on the CEO’s presence or decisions) introduces significant risks:

Execution Bottlenecks: Projects stall when the leader is unavailable. This slows innovation, increases delays, and frustrates teams.

Burnout Risk: The leader risks physical and mental exhaustion, compromising judgment and productivity over time.

Knowledge Hoarding: If institutional knowledge lives primarily in one person’s head, institutional memory is weak — a succession disaster is in waiting.

Succession Planning Gaps: Potential successors are not empowered or trained because they are not delegated real decision-making responsibilities.

In contrast, time decentralization builds bench strength. It ensures continuity, resilience, and operational independence beyond one individual.

How do concepts like delegation, outsourcing, and automation reflect time investment vs return?

These tools are methods of increasing the return on time (ROT), similar to increasing return on capital.

Delegation is the internal reallocation of tasks from a higher-paid or more strategic leader to a capable subordinate, freeing the former’s time for high-leverage work.

Outsourcing is like capital leasing — you get expertise and capacity without long-term overhead. It trades money for time and skill.

Automation is the ultimate time-scaler — zero marginal time after initial investment. It transforms repetitive tasks into autonomous processes.

Each method should be evaluated using time ROI — “Does the time or money I spend now generate a multiple of productive hours later?”

If you were Theorhema’s COO, what additional strategies would you implement to multiply executive capacity?

As COO, I would implement the following strategies:

Build a Time Dashboard: Track and categorize time spent across the executive suite — strategic, operational, reactive, and wasted time. Use data to optimize priorities.

Create a “No-Meeting Zone” Policy: Designate certain time blocks during the week as deep work hours for executives — protecting their most creative and analytical windows.

Establish a Delegation Training Program: Train senior managers on how to delegate effectively, reducing upward escalation and freeing executives from tactical decision-making.

Adopt Agile Pods: Create cross-functional agile teams that work autonomously on key initiatives, with minimal executive involvement unless escalation is needed.

Introduce a “Time ROI Review” in Project Proposals: Require every new initiative to show not only capital ROI but also executive time cost and how the activity aligns with high-leverage priorities.

These steps institutionalize time-awareness and protect the leadership layer from low-value distractions.

From a corporate finance lens, can human time be valued using NPV concepts? If so, what factors affect that valuation?

Yes, human time can conceptually be valued using NPV, especially in knowledge-intensive or service-oriented businesses.

Formula (simplified):

NPV of Time = ? (Hourly Value × Hours Worked per Period) / (1 r)^t

Where:

Hourly Value = Output per hour (financial or strategic)

t = time periods (years, quarters, months)

r = discount rate (adjusted for risk, fatigue, obsolescence of skills)

Key Factors Affecting NPV of Time:

Skill Level & Productivity: Higher skill increases the hourly contribution and thus the value of time.

Market Demand for Skills: Scarcity and demand (e.g., for tech skills, regulatory expertise) increase the present value of those hours.

Energy & Health: Time value can decline with fatigue or poor health, especially for executives under stress.

Age & Career Stage: Younger professionals may have more future high-productivity hours; senior professionals may have fewer, but higher-value hours.

Delegation Efficiency: A person who can multiply their time through others has a higher NPV of time than someone who works solo.

Using this approach, organizations can more intentionally allocate high-value hours to high-impact projects, and avoid wasting premium executive time on low-return activities.

The author is a Strategy, Leadership & Finance Enthusiast, an Mphil Finance graduate of the University of Ghana Business School, a member of the Institute of Chartered Accountants, Ghana, and a part-time lecturer at the UGBS.

Email: [email protected]

The post Cases in Finance – Episode 2 with Enock YEBOAH-MENSAH: “Scale Eats Margin: A telecom lesson every startup should learn” appeared first on The Business & Financial Times.

Read Full Story