April 2, 2009
The Kenyan telecom market provides a vibrant example of how increased competition in the mobile market can spill over into all areas of the telecom sector by pushing operators to turn to bundled and converged services to improve their market positions. Although it is still early days, current trends suggest that the decision by the Communications Commission of Kenya to offer unified licenses in 2008 will generate the rapid growth and development that it had hoped to see in the fixed market.
The Kenyan mobile market became dramatically more competitive in 2008, when two new operators, Orange Kenya (formerly Telkom Kenya) and Econet Wireless, joined incumbents Safaricom and Zain. This has led to a price war, with operators slashing tariffs and offering various airtime promotions. Safaricom is the leading mobile operator, with a 79% market share (11.9m subscribers) as of year-end 2008, and indeed it dominates the whole telecom sector, earning 59% of total telecom revenue in 2008. As we found in our Communications Markets in Kenya report, however, Safaricom can expect to receive a smaller slice of the revenue pie going forward, thanks to the newly competitive environment. We expect that Safaricom’s revenue share will have fallen to 48% by 2013 (see exhibits below).
There is still room for growth in the pure-play mobile sector, as the mobile penetration rate in Kenya was only 39% at year-end 2008. But rather than fighting over a dwindling pool of increasingly poor mobile subscribers, Kenyan operators are looking toward convergence to increase their market shares and protect their ARPS. Safaricom, for example, will launch new bundled services to corporate clients, including broadband, video conferencing and voice, in order to boost its ARPS and its market share among high-value subscribers. It expects to see the share of its revenue that comes from Internet services to increase from 13% to 20% as a result of its converged-services strategy. As the only 3G operator, it can also use its mobile broadband service to attract high-end and business clients.
Orange Kenya, meanwhile, is coming at the problem from the opposite direction. As the fixed incumbent, it already has a fixed network and a subscriber base that includes wealthy corporate clients. It has already started to bundle fixed services, while cutting prices aggressively on the mobile side to build up its mobile market share. It has announced plans for quadruple-play services in the future, offering fixed and mobile voice, video and broadband.
Smaller operators are also participating in the multi-service trend. Zain, the second biggest mobile operator, is said to be interested in acquiring WiMAX spectrum. Wananchi, an ISP, has introduced triple-play services under the brand “Zuku,” offering TV, Internet and VoIP services. Although most services are currently offered via cable, Wananchi is also rolling out WiMAX and a hybrid fiber-coaxial network. Kenya Data Network commissioned a triple-play-ready network rollout from Alcatel-Lucent in 2007, and has also deployed WiMAX.
The effect of all the changes on the Kenyan market will be truly transformational. As recently as 2007, Kenya’s fixed market was a monopoly, and its mobile market a duopoly. By 2013, Kenyans will be able to choose between four or five mobile operators and at least three large fixed operators. As a result, we expect mobile penetration to reach 67% and broadband penetration to reach 1% by the end of the forecast period.
Kenya telecommunications revenue shares (percentage of total revenue)
Source: Pyramid Research
— Yejide Onabule, Analyst
Communications Markets in Kenya
Country Intelligence Report published March 2009
We expect Kenya’s telecom sector to grow to $1.98bn by 2013, from $1.39bn in 2008. Mobile voice services will generate the largest growth in dollar terms —from an estimated $0.97bn in 2008 to $1.32bn in 2013 — and we predict that mobile data will be the telecom sector’s fastest-growing revenue stream. This Country Intelligence Report analyzes Kenya’s communications, media and technology industries, including key trends, regulatory pressures and the competitive landscape, making it an excellent complement to our Forecast products.
Mobile Financial Services in Africa: The Business Case for Operators and Banks
Research Report published January 2009
The use of mobile devices to pay for goods and services has been held back in most markets, but mobile payments are having a more penetrating impact in poorer economies than in mature ones, with market dynamics that are starkly different, especially in Africa. In this context, new business models have emerged that are transforming the financial landscape in developing countries. This report reviews and analyzes mobile financial services offerings in African markets, looks at drivers and obstacles to mobile financial services, breaks down business models to assess their true bottom-line impact, and provides market projections based on intrinsic market dynamics.
Africa & Middle East Mobile Demand Forecast, Q1 2009
Forecasts published March 2009
Updated on a quarterly basis, our Mobile Demand Forecast products provide complete pictures of demand trends for 59 geographical markets in Africa & Middle East. The Excel output includes five years of historical data and five years of market projections for metrics such as GDP, mobile penetration, subscriptions (by operator, type of package, technology), ARPS and total mobile service revenue (data and voice). The Forecasts are based on extensive field research and use a consistent methodology across all markets, aiming to capture the total spending, from an end-user perspective, on mobile communication services in each market.