The number of active mobile money accounts is growing fast, and in June 2013, there were over 50 million active mobile money users globally, according to the GSMA. Kenya set the success model with M-Pesa in 2007 and the growth has continued in the country. By 2014, mobile payments penetration was 85% in Kenya, according to Boston Consulting Group.
“Mobile money has sparked fresh competition in the country’s telecommunications sector. This has in turn promoted new innovations by service providers to increase their service offerings to the customers. To the consumer, mobile money service has increased financial inclusion by extending financial services to the unbanked population which still remains significantly high. The service also provides employment to local companies through distribution and other supporting roles,” said Danson Njue, research analyst at Ovum.
For operators, mobile money is an innovative service that drives customer acquisition and provides new revenue streams, according to Njue. “The service helps to reduce churn as customers are less likely to switch networks and lose the benefits of using the service. Operators are also using mobile money service to increase brand value in the market.”
Leonard Kore, analyst at IDC, said that mobile money have increased the partnership between the telecoms and banking industry. “Telcos now want to be in the financial services industry and vice versa. Most recent example being Kenya Commercial Bank KCB and Safaricom partnership to provide mobile banking loan facilities to users. A counter product to the very successful M-Shwari service provided by Commercial Bank of Africa (CBA). The two have also launched a product providing SMEs both technology (communication solutions) and financing services (loan facilities) signifying continued convergence between the two sectors,” Kore added.
As mobile technology has developed into a platform for digital services, operators have a role when creating and delivering mobile enabled services. Kenya is aware of the importance of its mobile technology in order to develop different digital services and operators are growing the tendency of using OTT players.
Safaricom offers Google Free Zone to its mobile phone subscribers and allows users to access all Google’s applications via their mobile network without incurring any data fees. “Facebook and Wikipedia are some of the other players who have championed similar free zones in Kenya,” Kore said.
“According to the Communications Authority of Kenya (CAK), total Internet users increased by 22.9% FY2013 to 26.1 m users (2014). This represents that 64.3 out of a 100 inhabitants have access to Internet. Although awareness of these value added services is low, we expect data usage to increase as more free zones are introduced and users start enrolling to these services. IDC also argues that this is a win-win situation for OTT players i.e. Google due to the potential in ad-revenue they may gain, while telcos can gain customer loyalty,” he added.
Kore highlighted that access to Internet enabled phones or smartphones, and 3G and 2G network coverage remain a concern in the country.
Telcos benefit from continued usage of social media services, such as Facebook, Twitter, Instagram, by encouraging higher data usage and a lock-in effect for users who continue using the services. “Safaricom currently has an estimated 11.8 million subscribers, VAS services such as Free Zone are expected to increase their subscriber base. Other players such as Airtel Kenya have also recently launched Unlimi-net tariff that provides users with unlimited Whatsapp, Facebook, Gmail, Twitter and Instagram access bundled with voice and text at very affordable rates. QoS and bandwidth capacity remains a key challenge as increased usage is not matched by accelerated investment in network infrastructure,” Kore added.
Tackling security issues
“Operators such as Safaricom are facing increasing cases of fraud with majority of these being asset misappropriation, fraudulent expense claims and corruption. The telco has dismissed over a 100 employees in the past 3 years for fraud related cases. Other security challenges faced by telcos in the region involve incidences of breach in customer data and information involving collusion with internal staff,” said Kore.
Apart from these issues, security challenges for operators include vandalism of copper and optical fibre cables, and diesel fuel used to run power generators. “Operators continue to increase investment in security by hiring more security personnel to guard network sites to avoid theft. Operators also continue to lobby the government to introduce hefty fines to curb vandalism of network infrastructure,” Njue said.
Kenya’s military entered Somalia at the end of 2011 to fight al-Shabaab militants, who have carried out major reprisal attacks inside Kenya, while the country is also fighting against al-Shabaab. According to Kore, the latest attack will not impact the telecoms sector as it did in other Africa countries, such as Nigeria with Boko Haram. “Kenya’s private investment in telecoms largely remains unchanged,” he added.
“Money transfer services have been affected by recent terrorist attacks with 13 money transfer services transmitting funds between Kenya and Somalia being suspended following investigation. It is estimated that cross border transactions between the two countries is over $80 million. While no telco has been suspended, there has been calls to also suspend Safaricom’s M-Pesa. IDC expects more regulation and government control to respond to growing terrorist threats especially from Somalia,” Kore noted.
“In my opinion, the attack will not slow down investment in the sector. If anything, the investment in the sector will increase. For instance, the country’s leading mobile operator has recently signed a contract to implement the national security surveillance system for the government. Orange Kenya has continued to increase its 3G/3G+ footprint in the country through increased deployment,” Njue added.
As these analysts agreed, the Kenyan telecoms market will continue developing and it offers opportunities to operators in the enterprise services arena, among others. “Cloud, managed services for enterprises, enterprise mobile money solutions, revenue collection and management systems following digitalisation of county government revenue collection systems,” Kore said.
“The country’s telecom sector offers great opportunities to operators, especially in broadband and mobile financial services segments. Increased broadband penetration and the planned nationwide LTE network will offer operators with opportunities to provide digital lifestyle services to their customers. Kenya continues to see increased adoption of mobile money interoperability that will see operators offer cross-network and cross-border money transfers and hence usage and revenues,” added Njue.