Back in 2007, Kenya’s telecoms sector was hamstrung by a lack of international connectivity, a situation that served to perpetuate low mobile and internet penetration rates and so stymie investment.
But just five years later, the African nation’s ICT sector has been transformed by a supportive ministry of communications, an aggressive regulator and millions of dollars of investment.
The turning point came with the deployment of two subsea cables, TEAMS and Seacom in 2009, which connected Kenya to the rest of the world for the first time. These cables were followed by two more: EASSY, which went live in 2010, and Lion 2, which was activated in April this year.
For Samuel L. Poghisio, who became Kenya’s Minister of Information and Communications back in 2007, the deployment of the subsea cables marked a sea change in the fortunes of the country’s ICT sector.
“I have been minister now for five years I came at a time when we had no submarine cables at all to the east coast of Africa. It was our collaboration with Etisalat [for the TEAMS cable] that allowed us to deploy the cable from Fujairah all the way to Mombassa. That really changed everything and gave us the capacity to think about being a leader in the ICT sector, especially the internet.”
The effect of the subsea cables is difficult to overstate. For example, within three days of SEACOM’s launch in July 2009, Kenya reported a three to five times increase in internet speeds. Within 14 days of the launch, the CEO of mobile operator Safaricom reported a 200% increase in data traffic, and a 700% overall increase of international bandwidth supply was recorded.
“I came at a very exciting moment and the policies were very good and the government was supportive,” Poghisio adds.
Kenya’s telecoms sector also received a significant boost from Chinese vendors Huawei and ZTE, which began investing in Africa at a time when their Western counterparts remained deterred by the perceived risks of investing significant sums on the continent.
Poghisio says that Kenya started to work with Huawei on developing a fibre-optic backbone for the country prior to the arrival of the sub-sea cables. With both components in place, Kenya was well-positioned to move towards its aim of becoming an ICT hub for sub-Saharan Africa.
“We wanted to do things in sequence: get the infrastructure in place, get the capacity we required in place, and then move this across towards the borders so that Kenya could interconnect with its neighbours, and then you will grow a bigger market,” the minister says. “So our ambition now is to become the hub of ICT not just for Kenya but for most part of sub-Saharan Africa. Our goal is to be really up-to-date with the rest of the world when it comes to technology and innovation.”
The effects of the subsea cables and the fibre-optic backbone are plain to see in terms of the country’s mobile sector, which has also been spurred by healthy competition.
Continues on next page
Indeed, the country has four mobile operators: Safaricom, Airtel, Orange Kenya and Yu Mobile. Kenya’s mobile subscriber base reached 29.7 million in June 2012, giving a mobile penetration rate of more than 75%, up from just 35% in March 2008. Internet services have also made significant gains. In June 2012, the number of internet subscribers passed 7.7 million, up from less than 2 million in March 2008.
Poghisio lauds the impact of competition on the market. “We have one of the best regulatory frameworks and I think that really helps to stabilise the market, and competition is still a very critical part.”
However, he adds that there is a delicate balancing act between ensuring sufficient competition exists in the market while still allowing all players to gain a solid return on investment. However, Poghisio refuses to rule out any new players entering the market, although he suggests it would be unlikely.
“We still have new entrants in the market and then we have companies that have been there longer who definitely have an edge over the others. Making sure that we keep everyone in the business without anybody being run out of town is a very difficult part of it,” he says.
Continued weakness in the world economy has also presented challenges, not least by slowing down the uptake of smartphone and broadband services among Kenya’s population.
“Of course the economy affects business. The world economic slowdown has affected us and yet we are trying to do quality work and at the same time ensure services are affordable to the people,” Poghisio says. “There is so much interest in people joining and using the internet but there is the challenge of affording hardware and equipment, especially good quality equipment. You are now looking at smartphones being necessary […] and they are expensive.”
Despite this, there is strong demand for mobile internet services, which account for a significant proportion of the country’s internet subscriptions.
Poghisio also stresses that the cost of voice and data services is falling rapidly. “Kenya has somehow lowered the price of calling. We are probably one of the cheapest in the world today if you are calling from Nairobi,” he says.
And while smartphones may remain out of reach for many Kenyans, he adds that some manufacturers, such as Nokia, have introduced devices that can make use of 3G networks “at prices that people can afford”. “There are some very useful phones that you can use on 3G that cost about KS 2000. That is about $25-30,” Poghisio says.
But it is not just mobile broadband services that are transforming life in Kenya. Older 2G-based services are also continuing to improve the lives of Kenyans. A prime example is the popularity of mobile money transfers, a sector which took off with the launch of Safaricom’s M-Pesa service back in 2007.
Furthermore, the minister adds that money transfers hint at the direction Kenya is taking. The government intends to move further in the direction of e-commerce.
“We were the first people to do money transfers through Safaricom’s M-Pesa and that has put Kenya on the map. We are about to put everything in e-commerce and for us now the biggest challenge is making sure that we have capacity to take care of services, and cyber security,” he says.
Continues on next page
“The government is moving along with that including e-government, and investing in e-government. The government of Kenya has really given us the political will needed which I think is missing in many places,” he adds.
Connecting the country
With a fibre optic backbone already in place, the government is moving forward with the deployment of a nationwide FTTH network.
“Financially we wouldn’t be anywhere if the government didn’t put money in making sure that Kenya is wired or connected, the cables have been put everywhere,” Poghisio says.
“People are now getting fibre to the home in the cities and very soon that should cover most of Kenya, so people have a direct feel for what we have been doing for the past five years.”
The FTTH network is being implemented by a consortium that includes government and the private sector, although the actual deployment is in private hands. The government is involved at the broadband wholesale level while the point of distribution, or retail, is being left to the private sector, the Minister adds.
Much of Kenya’s population is already covered by the network. “Right now the city of Nairobi has been covered. The fibre has reached almost all the main cities. What is slowing us down now is probably the capacity of the private companies who are rolling it out to the homes,” Pohisio says. “It is very important to know that once we have covered six of our main cities it will give 70% coverage.”
He adds that 70% of the country should be covered by the network by the end of 2013, and that two or three operators will use the FTTH network to provide fixed-line services.
He also stresses that the network will not just cover the main cities, but will eventually reach all parts of the country. “We have a very aggressive programme to close the divide in the rural areas particularly. That is why our fibre backbone is being laid to every single district, for the purposes of making sure that everyone is supplied with the same opportunity to really connect,” Poghisio says.
Aside from driving Kenya’s ICT sector through regulation and investment in telecoms infrastructure and services, the government is also developing a new “techno city”, called Konza Technology City, about 60km from central Nairobi and 50km from Jomo Kenyatta international airport. Initial construction work is expected to start toward the end of 2012.
“It will be a business park for much more than ICT. It will have universities, hotels, recreation parks – the whole ecosystem for a city,” Poghisio says. “But its major work will be mostly ICT based business and products that come out. It will be like a Silicon Valley for Kenya.”
He adds that the development, which covers some 2,000 hectares, has already attracted significant investment and has been dubbed as a “Silicon Savannah” by local media.