2010 Kenya - Telecoms, Mobile, Broadband and Forecasts

Kenya’s telecommunications and broadband market is undergoing a revolution following the arrival of three fibre optic international submarine cables in Kenya in 2009 and 2010 (Seacom, TEAMS and EASSy), ending its dependency on limited and expensive satellite bandwidth. Bandwidth prices had already fallen significantly following the liberalisation of international gateway and national backbone network provision in 2005, but they have now fallen by 90%, enabling cheaper tariffs for telephone calls and broadband Internet services. However, Internet service providers (ISPs) have only reluctantly passed on the cost savings to end customers, which has prompted the industry regulator to consider price caps.

Besides tariff regulation, other regulatory issues on the agenda in 2010 include interconnection, number portability and universal service.

A simplified and converged licensing regime introduced in 2008 has lowered the barriers to market entry and increased competition by allowing operators to offer any kind of service in a technology – and service-neutral regulatory framework. Companies that started out as ISPs – such as AccessKenya, Kenya Data Networks (KDN) and Wananchi – are transforming themselves into second-tier telecom companies by rolling out national and metropolitan fibre backbones and wireless-broadband access networks, offering converged voice, data and video/entertainment services. Several fibre infrastructure sharing agreements have been forged. At least six major deployments of WiMAX technology are underway and 3G mobile broadband services with up to 7.2Mb/s have been launched. Advanced services such as IPTV/triple-play, e-commerce, e-learning and e-government are now rapidly evolving.

The country’s incumbent fixed-line telco, Telkom Kenya, is revamping its infrastructure and services under the Orange brand with fresh capital from its new majority shareholder, France Telecom. It has also re-entered the mobile market and has embarked on a strategy to transform itself into a true broadband connectivity provider.

A price war has characterised Kenya’s mobile communications market in 2008 and 2009, following the market entry of the third and fourth network, Econet Wireless Kenya (EWK, in which India’s Essar acquired a stake), and Telkom Kenya under the Orange brand. Subscriber growth is now forecast to slow over the coming years, and rapidly falling ARPU levels have driven one of the incumbents, Zain, deeper into negative earnings, leaving only the market leader, Safaricom, with a net profit, although reduced.

The operators are developing new revenue streams from 3G broadband and mobile banking services. The first LTE trials are planned for 2010. With market penetration rates in Kenya’s broadband and traditional banking sector still extremely low, the mobile networks have an opportunity to relive the phenomenal growth rates seen in the voice sector in recent years.

This report contains an overview of Kenya’s mobile, fixed-line, Internet and broadband market, profiles of the major players in all market sectors, relevant statistics, analysis, and mobile subscriber forecasts for 2012 and 2015.

Market highlights:

• Forecasts for Kenya’s mobile market to 2012 and 2015;
• Decreasing ARPU under intense competition between four mobile networks;
• Growing new revenue streams from mobile broadband and m-banking services;
• Arrival of international fibre bandwidth in 2009 and 2010 is revolutionising the market;
• Competing national fibre backbones to enable converged voice, data and video services and lower prices;
• Profiles of major players in all market sectors;
• The rebirth of Telkom Kenya under the Orange brand;
• The emergence of new second-tier telcos;
• Fibre infrastructure sharing agreements;
• LTE trials planned in 2010.

Estimated market penetration rates in Kenya’s telecoms sector – end 2010

(Source: BuddeComm based on various sources)

Data in this report is the latest available at the time of preparation and may not be for the current year.