Category Archives: Telkom Kenya

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’..

Telkom nationwide coverage across Kenya

Telkom has got extensive coverage across Kenya. For companies, Telkom Enterprise offers the best options in three different packages of data and voice products in all counties that can be tailor-made to suit any customer’s needs:

  • BVPN (business VPN) provides connectivity for large companies and is available in all the 47 counties of Kenya. BVPN can also be extended to even more remote areas using satellite and is scalable which means a company can add new locations with voice and video. This is ideal for large companies with a presence in different locations that want security and which have sensitive, encrypted data that needs to be transferred nationwide.
  • JamboNet is a dedicated access offering with fast reliable Internet for businesses that range from 1 MBPS to 150 MPBS. An online customer portal enables monitoring and reporting and the service is backed by a strict service level agreement (SLA) that aims at 99.9% uptime.  The quality of JamboNet service does not degrade as more users join on, and it comes with a firewall as a standard. JamboNet is available nationwide and there is also a wireless option to extend the service to areas that don’t have cable already
  • E@zyNet is an unlimited fixed bandwidth solution for SME customers. There are different monthly cost packages starting at an affordable price of Kshs 3,499 (~$35 per month). It is easy to start and reliable, offering high download speeds and flexibility for users.

Telkom, which has data centres and cloud storage also manages the Kenya government’s National Optic Fibre Backbone (NOFBI) – a national inland fibre optic cable network. Telkom has also invested in VSAT, satellite communications in remote areas, a terrestrial fibre optic cable network, GSM, and 4G LTE. Other products that are optional include free intra-company calls (within a local user group), wireless landline, fleet management, and County government solutions and other value-added services designed for hospitals and schools.

According to the latest Communications Authority of Kenya quarterly report (December 2016), the number of fixed fibre optic subscriptions grew by 18% during the quarter while that of fixed cable modem subscriptions increased by 2.8%. In a statement, Managing Director of the Enterprise Division at Telkom Kenya, Kris Senanu said “success for a Kenyan enterprise should be seen in the lens of reduced downtime through reliable connectivity; operational efficiency through uninterrupted connectivity; great customer service and clear communication lines with stakeholders and ultimately revenue-generating that leads to business growth.”

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.