Kenya: Towards new opportunitites

Mobile money represents one of the main opportunities for the telecom sector
Competition in Kenya's telecommunication sector was improved thanks to the connection of new submarine cables which brought cheaper capacity.
Competition in Kenya's telecommunication sector was improved thanks to the connection of new submarine cables which brought cheaper capacity.

Share

The telecommunications sector in Kenya is one of the most competitive markets on the African continent, mainly due to the landing of several submarine cables in the country from 2009 onwards, which has helped to increase bandwidth capacity and reduce its cost.

“Kenya now has the lowest cost broadband in Africa. Home Internet users can access triple play services (voice, digital TV, with a 10Mbps FTTH connection) for only $45, a price that was virtually impossible to imagine some years ago,” said Leonard Kore, analyst at IDC.

Kore said that the entry of new players in the market has led to improvements in reliability and consistency of broadband services as compared to the past. The increased competition was also driven by the entry of mobile virtual network operators (MVNOs) into the market. According to Kore, MVNOs helped to improve value-added services.

“For instance Kenya Airways, the flagship airline in Kenya, has acquired an MVNO license to offer roaming services for its customers. We expect new players in the retail industry to also join the MVNO boat in the future,” he said.

These operators are aware of the importance of the mobile money ecosystem, which some MVNOs have adopted as the main basis for their business model.

“Three out the four MVNOs recently set up are offering mobile money services as their key product. With increased competition in this segment, we shall see increased innovation and a drop in prices within the sector,” Kore told CommsMEA.

However, the Communications Authority of Kenya needs to deal with some challenges that MVNOs bring to the market, such as the security risks if mobile money solutions are not guaranteed by banks, because the technology that is planned to be deployed is not secure.

“Delays in authoritative decision making in the industry whether due to lack of authority or unclear mandate has caused delays in deployment of new services in the telecoms space,” said Kore.

Importance of mobile payments in Kenya

Moving from basic peer to peer transactions to integrated mobile payments of everyday goods and services has translated into increased ARPUs for mobile money players as they enjoyed an increased number of transactions.

“Mobile payments are now moving towards enterprise, for example in manufacturing and retail industry. Mobile money is helping these industries in field-to-office remittance of funds a model greatly favoured by enterprise due to ease, convenience and transparency. This has enabled telcos to generate enterprise revenues from mobile money, a promising endeavour as this market segment is still nascent,” Kore said.

Moreover, he believes that partnerships between banking institutions and operators are proving to be a win-win situation. “For example M-Shwari, a mobile savings and loan service between Safaricom and Commercial Bank of Africa (CBA), has been largely successful. Since inception in 2012 CBA has disbursed over $92 million in mobile loans and $278 million has been saved by users. To put this into context CBA has now become the biggest lender in Kenya in loan accounts jumping from 89,000 accounts in 2012 to 897,000 in 2013. Safaricom of course enjoys revenues for all these transactions.”

Apart from the mobile payments opportunity, driven by the large unbanked population, the telecoms sector offers new growth segments in rural connectivity, as a large percentage of the country still lacks network coverage.

“Lack of IT skills and the growing need to seek third party providers to manage their ICT needs means growth of managed services is on the cards. However infrastructure, expertise and other managed services capabilities are not present in a majority of players prompting them to partner with other players,” said Kore about future opportunities in the sector.

The race for the lucrative mass home Internet users will take centre stage in the future as the enterprise segment becomes congested, according to Kore. “ISPs such as Wananchi currently control market share in the country through offering competitive convergence of voice, Internet and TV content. However differentiation of products and services will be key to gain leadership in this market segment.”

Webinar #2 | Register to attend - Intergenerational signalling consolidation for the 5G era

Join CommsMEA, Deutsche Telekom and NetNumber as they explore opportunities for intergenerational signalling consolidation for the 5G era. The webinar is free but can only be accessed by registering below in advance.

Editor's Choice

Emerson expands analytics platform for industrial enterprise-level wireless infrastructure management
Plantweb Insight platform adds two new Pervasive Sensing applications that manage wireless networks more efficiently with a singular interface to the enterprise
Digitalisation seen as a competitive advantage by Middle East private businesses
Nearly 80 per cent of private business leaders acknowledge that digitalisation can impact business sustainability
Etisalat introduces Multi-Access Edge Computing architecture delivering best-in-class video streaming performance for 5G networks
MEC architecture achieves performance gains of as much as 90% in video streaming, validating how ultra-low-latency applications will be delivered over 4G and 5G networks

Most popular

Don't Miss a Story