Category Archives: kenya communications

Regulatory hammer for Kenya telco reverses gains

Reading a version of a report (August 2017) on the telecommunication competition market study in Kenya by  Analysys Mason (AM) of London for the Communications Authority of Kenya presents some startling observations and unwieldy regulatory recommendations.

They regulatory target is the telco – Safaricom, which is the market leader in Kenya’s telecommunications and mobile money space. The reports documents areas where Safaricom is dominant as well as other telco spaces and areas where other companies like Telkom Kenya, Airtel, Wananchi, Equitel (from Equity Bank) and Multichoice (who were beyond the scope of the study) also dominate.

The AM report looks at the current state of the telecommunications sectors, but it ignores the reality of how it got to be where it is – the history of telecommunications in Kenya, strategic-decision-making, investment & management decisions, price wars, new technologies like mobile money and fibre cables etc.

Other studies have been done on the telco sector in Kenya by different agencies. In 2012 Citi did a report on Bharti Airtel (after Bharti-Airtel bought out Zain Africa in 15 countries for $10.7 billion in 2010) and at the time; It noted:

Safaricom is by far the largest operator, with a 65% market share. Bharti is a distant second with a 15% share. Safaricom’s dominance has come down from a  peak of ~80% a couple of years back as the smaller operators have become more aggressive.. while they both launched in 2000, Kencell (now Bharti) focused on the quality of network and high ARPU customers, Safaricom focused on the mass market. Also innovations like per-second billing, which Bharti took some time to introduce and M-PESA also helped  (Safaricom) cement its dominant market position and Safaricom’s stable management in contrast to Zain’s frequent management (1. Kencell 2. Celtel 3. Zain 4. Bharti) changes also helped it compete more effectively.

Kenya has other dominant players such as EABL (alcohol), BAT (cigarettes), Kengen (energy production) and Brookside (milk), but the Communications Authority (CA) is the only agency that can declare if there is a dominant telco market player.    

In the past, the CA  has pushed some changes to level the telco field such as rolling out number-portability, the ending of mobile money agent exclusivity, and the upcoming rollout of mobile money interoperability.  

But some AM report proposals are regressive such as at least five days before launching a new tariff, loyalty scheme or promotion, Safaricom should provide a justification that the proposals can be replicated by a reasonably efficient operator – AM or that Safaricom may not offer loyalty bonuses or promotions for which the qualification criteria require different levels of expenditure or usage by different subscribers in the same category – AM
The range and messaging of different Safaricom promotions like Tunukiwa, Bonga, Flex and now Platinum, is sometimes confusing but they should not be restricted from competing and innovating. Already, another investor report by Citi has already expressed concern about the impact on telcos of some of the regulatory recommendations in the AM report including that they may have effects that will be unclear, they do not foster innovation, and they may result in high prices. 

The AM report notes that there is some concern among investors in that, as Safaricom has maintained a high share of the market for many years and that recently Essar/Yu exited Kenya (2014), Orange sold out (to Helios who re-branded as Telkom-Kenya) and Bharti indicated that they may  also consider leaving Kenya, and perhaps other countries in Africa.

While appeasing investors is good, they have to contend with Safaricom and its impact on a telco regulator with targets, and to the Kenya government country as a significant taxpayer (Safaricom’s 2017 annual report cites payment of Kshs 84.3 billion in taxes and fees to the government, in addition to 35% of Kshs 57 billion dividends that was paid to shareholders)

Finally, Safaricom is a vertically-integrated company, and dominant players come and go and they evolve over time as market forces, customers, and technologies changes. The AM report notes the introduction of Pesalink, which can be seen as a reaction by the banking sector to M-Pesa, and it also cites the use of Equitel – on average, a Safaricom M-Pesa subscriber makes 6 transactions per month, whereas an Airtel Money subscriber makes 0.6 and an Orange Money subscriber makes 0.1. However, the average Equitel subscriber makes 10 transactions per month – AM. 

No one knows what the telco sector will look like in the next decade, but the consumers, not regulatory muscle, should be the decider.

Telkom Kenya is Back

  • Telkom Kenya has relaunched almost 12 months after the exit of the immediate former majority shareholder, the Orange Group (formerly France Telecom), – who sold its majority stake to private equity firm, Helios Investment Partners. The Kenyan Government owns 40% of Telkom. 
  • “We are committed to gradually restoring Telkom’s relevance in Kenya’s social and economic dynamic to transform it into a viable market player in the telecommunications sector and a profitable national asset,” says Company Chair, Eddy Njoroge.
  • Telkom also launched a 4G network with free daily data in all major towns and also  entered the home broadband market offering 4G to homes in an offer dubbed ‘Home Plan’..

Simplifying M-Pesa Payments with 1Tap

As they announced their 2017 financial results today, Safaricom also unveiled 1Tap – the next step of innovation to drive increased financial inclusion in Keyna.

M-Pesa is ten years old and CEO Bob Collymore said that Safaricom was launching “Mpesa 1 tap”  which would reduce the number of steps to complete an M-Pesa transaction, currently about 8 steps on SMS and USSD, to just 1 step.

At the result announcement, the Safaricom CFO Sateesh Kamath said that while 75% of M-Pesa revenue was from traditional person to person transfers, 25% was new from new business like “Lipa na Mpesa” (pay with M-pesa) payments.

Buy Goods is free for customers, except at petrol stations which levy an additional charge, and just over a month ago, Safaricom announced a 50% tariff reduction for all Lipa Na M-PESA Buy Goods merchant fees – to 0.5% of the transaction amount. These were also was capped to Kshs 200 for any payments over Kshs 40,000 (~$400) while payments to merchants below Kshs 200 were made free. Lipa Na M-pesa is used by over 50,000 merchants and Safaricom plans to enable more kiosks, boda-bodas, newspaper vendors and other merchants who are in the informal sector where 80% of Kenyan work to receive such vital business payments at no cost.

Merchants can also get instant payments into their bank accounts at any of 23 partner banks (of the 40 banks in Kenya) from a Lipa Na M-pesa menu in their phones in just a few seconds – and this is useful as many of the merchants don’t have time to go to the bank to deposit cash.

With 1 Tap, all a customer needs to do is tap their cards on the mobile POS machines and then enter their secret M-Pesa PIN to confirm the transaction. Pilot testing for Mpesa 1 Tap has been ongoing in Nakuru where the service now has 13,000 customers and 900 merchants. Kenyans briefly got to see what NFC could work with the Beba Pay service a few years ago, with payments in public service vehicles.

EDIT  October 3 Following successful trials over the last four months in Nakuru, Safaricom announced the availability of M-PESA 1Tap in Nairobi, Mombasa, Kisumu, Eldoret and Nyeri. ..M-PESA 1Tap will be available to all Lipa Na M-PESA merchants and customers and aims to make it faster and easier to make and receive cashless payments.

M-PESA 1Tap will be progressively rolled out to leading supermarkets, petrol stations, and restaurants…Some of the merchants where customers can now make payments with M-PESA 1Tap include Shell, Naivas, Choppies, KenolKobil, KFC, Oil Libya, Total and QuickMart. The merchant solution currently involves an NFC based reader integrated to merchants Lipa Na M-PESA tills.

Customers will initially have the option of obtaining an M-PESA 1Tap wristband, phone sticker or card which will allow payment integrations with M-PESA 1Tap merchant terminals. More convenient M-PESA 1Tap solutions are set to be rolled out in future. The tags are available from Safaricom shops and dealers from Ksh. 20.

Rediscovering Telkom Kenya

Monday’s nationwide outage of telephone, internet data, and mobile money services showed the practical need for people and companies to have viable alternatives for their daily connectivity. One of the oldest companies in this space is Telkom Kenya.

While it has been in the news more for its foray into mobile phone business under the Orange brand, other parts of the company have continued to chug along providing affordable and reliable services to customers, governments, and institutions  all across the country

Telkom Enterprise has three key connectivity products:  JamboNet for large businesses, E@synet Broadband for SME’s, and Flybox for homes and small businesses. Telkom has continued to invest and grow its infrastructure as well as through partnerships in submarine cables to extend broadband connectivity. The Telkom Kenya Entreprise division is now led Kris Senanu, long-associated  with Access Kenya and the history of internet service businesses in Kenya. Telkom manages the National Optic Fibre Backbone (NOFBI) for the Kenya Government and was recently contracted to roll out free Wi-Fi to over one thousand,  government-funded, incubation hubs in 290 constituencies around the country.

Telkom is 60% owned by Helios, an Africa-focused investment firm, and the Kenya government owns the other 40%. Other investments by Helios in Kenya include Africa Oil, Vivo Energy, and the Wananchi Group. It is also invested in Interswitch which supports financial connectivity services at a dozen Kenya banks and 1,000 ATM’s.

Kenya’s Money in the Past: Digital Kenya

Digital Kenya, by Bitange Ndemo and Tim Weiss, charts the rapid emergence of Kenya in the world of technology. Through stories and interviews with people in the sector, you learn about risk-taking and making policy from humble beginnings back in the mid-1990’s when the whole country shared 32 kbps, and the then telecom Kenya Posts & Telecommunications (KPTC) monopoly declared internet services as being illegal. At the time, KPTC was connecting about 10,000 users to the phone network, and with 77,000 potential customers waiting, they envisioned a 5% tele-density in Kenya by the year 2015. The tele-density in 2015 turned out to be 88% thanks to rapid changes that came after fibre cables and the cheaper mobile phones emerged.

One story is a narration of how, as a peace agreement was being signed in February 2008 to end the post-election violence in Kenya, the ICT Ministry managed to secure a guarantee to enable the laying of the TEAMS fibre cable that ultimately changed the face of ICT in Kenya. This came after the ministry had stepped back from another long-discussed  bureaucratic cable project – one called EASSY. This was one of the examples of government officials circumventing red tape for a good outcome. Another was the roll out of M-Pesa which is also cited here, ahead of regulations and thanks to some  individuals in government giving it their cautious blessing. Not all of them turned out well, and one case cited is of officials at the Postal Corporation sabotaging a land deal that would have led to the establishment in Nairobi of the headquarters of a multinational telecommunications organization.

There are many other stories that show issues of privatization, race, the lack of vision & finance, tech startups, the need for skills to scale, and the disconnect between local capital & the tech sector. It also shows the disconnect of ICT with both formal banking and also with the agricultural sector, two crucial links yet to be adequately bridged in Kenya.

Thanks to the Ford Foundation, the books is available free of charge and a free book download can be obtained.