Kenya - Telecoms, Mobile, Broadband and Forecasts

This annual report provides a comprehensive overview of trends and developments in Kenya's telecommunications market. Subjects covered include:

• Key statistics;
• Market and industry overviews;
• Regulatory environment and structural reform;
• Major players (fixed, mobile and broadband);
• Infrastructure development;
• Mobile voice and data markets, including 3G;
• ARPU trends;
• Internet development;
• Broadband, including 3G mobile;
• Convergence (voice/data, fixed/wireless/mobile).

Researcher:- Peter Lange

Current publication date:- September 2009 (8th Edition)

Next publication date:- September 2010

Executive Summary

Kenya's telecommunications and broadband market is set for a revolution with the arrival of the first ever fibre optic international submarine cable to the country's shores in mid-2009, with at least two more expected to go live by 2010. Bandwidth prices had already fallen significantly following the liberalisation of international gateway and national backbone network provision in 2005, but they may now fall by more than 90% again, enabling cheaper tariffs for telephone calls and finally taking the Internet to the mass market.

The country's incumbent fixed-line telco, Telkom Kenya, is revamping its infrastructure and services with fresh capital from new majority shareholder, France Telecom, and it has also re-entered the mobile market with a CDMA and a GSM network under the Orange brand.

A price war has characterised Kenya's mobile market in 2008 and 2009, following the market entry of Orange and the fourth network, Econet Wireless Kenya, in which India's Essar acquired a stake.

Subscriber growth is now forecast to slow over the coming years, and rapidly falling average revenue per user levels have driven one of the incumbents, Zain, deeper into negative earnings, leaving only the market leader, Safaricom, with a net profit, although reduced. Partly owned by Vodafone, Safaricom conducted a highly successful IPO in 2008.

The mobile operators are developing new revenue streams from 3G broadband services which are currently delivering up to 7.2Mb/s to subscribers. The other key area is mobile banking which has already surpassed the traditional banking sector in terms of users and carries 8% of the country's GDP. 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.

A simplified and converged licensing regime introduced in 2008 has lowered 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, Africa Online, Kenya Data Networks (KDN) and Wananchi, are transforming themselves into second-tier telcos by rolling out national fibre backbones and wireless broadband access networks, offering converged voice, data and video/entertainment services. At least six major deployments of WiMAX technology are underway, and Telkom Kenya has also revamped its fixed-line ADSL broadband offering under the Orange brand.

Key highlights:

• Forecasts for Kenya's mobile market for 2010 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 will revolutionise 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.

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

The following notes provide some background to our scenario forecasting methodology:

• This report includes what we term scenario forecasts. By describing long-range scenarios we identify a band within which we expect market growth to occur. The associated text describes what we see as the most likely growth trend within this band.
• The projections shown in the tables in this report are based on our own historical information, as well as on telecommunication sector statistics from official and non-official, national and international sources. We assume a possible deviation of 15-20% around this data.
• All statistics for GDP, revenue, etc are shown in US$, in order to maintain consistency within and between markets. At the same time we acknowledge that this can introduce some irregularities.

For those needing high level strategic information and objective analysis on the telecommunications sector in Kenya, this report is essential reading and gives further information on:

• One of the most competitive mobile markets in the region;
• Government policies affecting the telecoms industry;
• Market liberalisation and regulatory issues;
• Telecoms operators - privatisation, acquisitions, new licences;
• Internet and broadband development and growth;
• 3G mobile broadband rollouts and pricing;
• Average Revenue per User (ARPU);
• The m-banking services shaking up the traditional banking sector.