Kenya telecoms market

07 October 2014 |

Situated on the equator on Africa’s east coast, Kenya is well-positioned for both national and international connectivity to neighbouring countries Tanzania, Uganda, South Sudan, Ethiopia and Somalia.

Despite facing a number of challenges politically, with a nationwide lack of confidence in the government and declining revenues from tourism, the country’s telecoms market looks set for major reform.

To date, Kenya’s key telecoms players have been Telkom Kenya (Orange), Safaricom, India’s Airtel and Essar Telecom Kenya (ETKL), which operates under the Yu Mobile brand. However, with Orange rumoured to be selling incumbent Telkom Kenya, and Yu Mobile finalising a deal to sell its assets to rival mobile players Safaricom and Airtel, this could all change.

Perhaps the most notable development, however, is the establishment of a new regulator, the Information and Communication Technology Authority of Kenya (ICTA). In January this year, all four mobile operators failed quality tests set by the Communications Commission of Kenya (CCK), which had set a target compliance level of 80%.

The quality tests included call rates, call set-up success rates, dropped calls, blocked calls, speech quality, handover success rate and signal strength, and Telkom Kenya achieved the highest with only 62%. Airtel, Yu Mobile and Safaricom achieved compliance levels of 50%, with the latter ranking worst for completed call rates and the number of dropped calls.

Failing compliance levels results in a penalty fine of KSh500,000 ($5691.5) for each operator. None have been compliant for the last three years but despite this, Safaricom’s operational licence was renewed by the CCK for a further 10 years in November 2013.

The role of the new regulator is also thought to be aimed at reducing Safaricom’s dominance in the mobile money market. As a clear leader in this market, Safaricom’s M-Pesa mobile money platform has kicked up a storm across Africa. Mobile money has continued to record steady growth in the region and in July 2014 the CCK gave three MVNOs licences for operation, all of which are expected to use these to launch mobile money services to rival those of Safaricom.

The MVNOs – Mobile Pay, Finserve Africa and Zioncell Kenya – are expected to start delivering services in the next few months, using infrastructure from existing operators, including Airtel.

But looking to exit this lucrative market is Orange’s Telkom Kenya, which put its operations in the country up for sale in April 2014, citing a drop in revenues over the last year. Although it is a leader in fixed-line services, Telkom Kenya (Orange) says it has been struggling to compete with Safaricom in the mobile market and Orange notified the Kenyan government that it intends to sell its 70% stake in the subsidiary.

However, later in the same month, Mickael Ghossein, CEO at Telkom Kenya, said that the company was instead trying to increase its market share and enhance its services through a number of strategic partners in the country, and the operator also announced the expansion of its national 3G network.

The expansion to Uasin Gishu County, Eldoret town, Iten and the Moi University forms part of Orange’s strategy to connect all counties in Kenya to its high-speed network. Ghossein adds that Orange is strengthening its national broadband reach by laying transport cables across Kenya in preparation for the launch of internet connectivity via optional fibre networks.

The Kenyan government, meanwhile, has confirmed plans to build a 4G network in 2015 and is in talks with a number of operators (which remain undisclosed) over its implementation. The country’s telecoms minister revealed in April that Kenya is looking to launch 4G broadband in a bid to raise the internet’s contribution to economic growth from 2.9% to 10% by 2017.

Another issue at the forefront of Kenyan telecoms is Safaricom and Airtel’s joint acquisition of Yu Mobile. The two companies made a joint $100 million bid for Essar’s Yu Mobile – the country’s smallest operator – in March this year. Safaricom intends to utilise Yu’s infrastructure to improve its network quality, while Airtel is keen for its 2.75 million subscriber base, but the acquisition still faces regulatory hurdles.