Category Archives: Telkom Kenya

Bharti Airtel in Kenya

Zain/Bharti shake market: On August 18, Zain Kenya announced new unprecedented low rates for voice calls and SMS in a new tariff war. The new rates for calls of Kshs 3/=(~$0.04) per minute and for SMS of Kshs 1/=(~$0.01), which apply across all networks and are available to all Zain customers, easily trumps their main competitor, and market leader, Safaricom whose rates hover around Kshs 8 for a phone call and Kshs 3.50 for an SMS (and 12/= and 5/= to other networks for the same).

True cheap rates: The new rates have been well received with very popular comments online and a rush by consumers to obtain Zain lines or re-activate old ones. CEO Rene Meza called this a new long dark journey to market dominance [i.e. from 10% now] and one they will tackle aggressively for the long term. But is it sustainable? The last time Zain engaged in a price war, they ended in a bloody loss, with Zain gaining customers but not market share and $90 million in the red.

Airtel Strategy : However Zain Kenya is no more. The push comes from new owners Bharti Airtel of India who completed their takeover of the Zain Africa Group last month and will rebrand the company (in Kenya) by October 2010. They have also set out to re-position the local telecommunications sector in tandem with Essar and France Telecom by lobbying the government for other changes to level the playing field in a market they believe is unfairly dominated by Safaricom and which denies Kenyans true freedom of choice.

At the official launch in July, Airtel executives the emphasized some of their strategies including:
– They are rural focused and will build a rural brand through farming related promotions and CSR activities
– Be a low cost operators; employ low skilled sales force
– Lobby for number portability
– Push for lower interconnection rates which will lead to affordable products
– Lobby for infrastructure sharing i.e. no need to have 5 cell phone towers in a small town (all incurring electricity, security, cement, other charges) town when 1 will do with all Telco’s sharing transmission and fibre
– Work with ecosystem partners, like HP and Eriksson, and have a BPO call centre

Will the government deliver on low connection fees, number portability and infrastructure sharing? At the launch Meza mentioned that the Communications Commission of Kenya (CCK) had lowered the interconnection tariff from about 4 to 2 shillings effective September 2010.

Short-term losses: Meza said they plan to grow revenue and subscribers, and margins and profits will come later from operating a lower cost structure. And in a back stab at the previous owners (and perhaps minority shareholders), he said for the first time in eight years they have shareholders with the right mind-set to allow them to take opportunities in the market, increase rural penetration and utilise the right technology – by investing Kshs 24 billion (~$296 million) in the next 18 months on rural cell phone sites, revamping their zap money transfer systems, increasing their outlets & distribution network, expanding their 2G network, and rolling out a 3G network by the end of the year (since the license fee was reduced this year, they will be able to cover more parts of Kenya than just Nairobi and Mombasa)

Improve on Marketing: Marketing has always been a weak point at Zain, who keep throwing out too many confusing promotions one after another after another. The Wednesday Nation had a full-page ad for the new Zain (3/= and 1/=) rates and on the adjacent page was a small story touting a tariff for Zain ‘Club 20’ subscribers who could now get free calls and unlimited SMS from 11pm to 6 a.m. within the Zain network only! And all this comes a month after they had launched anotherrevolutionarypromotion. Hopefully this will hopefully change with the recent marketing executive appointments and re-focused brand and strategy.

EDIT – Other Developments
– Zain accuses Safaricom of sabotaging its new price offer
– Safaricom reassures Zain over inter-connect capacity, and says their concerns are premature.
– CEO’s e-mail exchange between Rene Meza (Zain) and Michael Joseph (Safaricom)
– Safaricom launches Masaa tariff with prices of Kshs 2-4 for Safaricom calls and Kshs 3-5 to other networks.
– Orange (France Telecom/Telkom Kenya) make their low cost pitch with Kshs 2 and Kshs 4 for on and off net calls respectively, with free on net calls from 10 AM to 5 PM for Kshs 100 per month ($1.25)

New Media Companies Redux

It’s been two years since this blog post comparing Access Kenya and Scangroup which debuted at the Nairobi Stock Exchange (NSE) at about the same time. They are both back in the news this week for diverse reasons along with a third ‘new media’ company Safaricom, which debuted later in 2008 on the NSE.

Scangroup: has just announced plans to buy stakes of 51% in Ogilvy & Mather Africa and 50% of Ogilvy East Africa. (statement here) – two companies are both subsidiaries of UK’s WPP Group who own 27% of Scangroup.

The investor at the Scangroup notes that group has recorded growing ads in TV and radio but declining in print media. In 2009, the communications sector was their largest customers with 29% followed by finance at 15%. Scangroup has 61% of the advertising market in Kenya followed by Access Leo Burnett with 13% and then Ogilvy & Mather with 10% – while their plans going forward are to do more online adverting and take the Ogilvy as their main brand across Africa

a version of this Safaricom by Squad digital, a Scangroup venture appears in the NY Times pages

Access Kenya: are in the news (details here) following their postponed by another three months of the annual general meeting that was to have taken place yesterday May 4 and payment of their divided. The company has not commented beyond a press statement.

From the blogs: On AK – a year ago, they were very very liquid while as recently as two months ago, they were hailed as a must buy stock.
from Twitter @bankelele not a shareholder, but as a concerned proxy lack of info is bad. AK should issue a profit warning or cautionary statement on restructuring
@mainaT I figure if AccessK is struggling now when internet is a growth sector, its got issues & a cash flow problem that won’t go a way 4 a while…but, Centum did the same in late 08 early 09 when it was having Cflow issues that meant it couldn’t pay a dividend
@roomthinker: Access Kenya customers, used to their speeds were not surprised to learn their AGM would be late
@coldtusker Y announce a dividend if u have CF shyte? For AK to say, ‘no div coz expanding’ is easy & plausible. Or pay only 5 cents like safcom…I think this is a bigger issue… Sold off at 22 so dont really care but I think they are in play. AK cud always delay div after AGM…I think less of cashflow issue. More of a acquisition/takeover/sale matter http://bit.ly/aJVCMm [#nairumours]

Finally we have Safaricom who initiated a spat with the government [statement here] after the Minister for Information (gazetted new rules for the sector including a fair competition one (draft here) and accusing the government regulator, Communications Commission of Kenya (CCK) of seeking to curtail Safaricom’s growth through price controls and to allow competitors to increase their market share.

The next day the three other mobile companies, Yu, Orange, and Zain replied in a joint statement applauding the new rules and saying they were not targeted at anyone (read Safaricom) but anyone who abuses of a dominant position in the market CCK had adopted international practices to bring real competition to the mobile sector.

This is new ground for Safaricom – when Orange raised a fuss about the uncompetitive Kenyan market, it looked like GoK would side with large taxpaying Safaricom, but now that all the small (unprofitable, they admit) new mobile entrants have teamed up, some token measures are likely to be brought to rein in Safaricom which is estimated to control at least 80% of the mobile sector by most measures. How do you bring down Safaricom from 80% to 60%?

Orange Kenya Outlook

Ever since the East African broke the story about France Telecom asking the Kenya Government (GoK) to reimburse it for more than the amount it paid to invest in the privatization of Telkom Kenya in 2008, its been an interesting tale – (summarized well here at Ratio Magazine) – and also confusing that a company invested in the mobile business – a component of one of Kenya’s fastest-growing sectors (communications) until recently, could be struggling. Orange is also the exclusive partner apple for the i-phone in Kenya which is the world’s leading smartphone.

Market leader Safaricom is part of the problem as Orange, Zain and Yu have been unable to shake its dominance of the market whether voice, data, dealerships, money transfer.

That Orange expects more support from GoK as a shareholder is evident since they still own a majority (51%) of Telkom Kenya, compared to the 35% GoK owns in Safaricom. E.g. Orange, Zain and Yu have been lobbying hard for the lowering of the cost of a 3G license from the current $25 million which only Safaricom has paid (Kahenya wants proof that 3G was paid).

But lobbying to GoK against Safaricom is not always as easy since they are one of the country’s largest taxpayers and a vital cash cow that is a consistent source of revenue for GoK increasing expenditure. e.g In the two years prior to Orange arrival, Safaricom paid GoK direct and indirect taxes of 24.1 billion shillings ($320 million) and 18.4bn ($245 million) which is almost as much as the 25 billion that Orange paid for their investment.

Outlook: Looking at the Orange parent accounts (France Telecom) for year 2009, it appears that Orange Kenya has no value (invested EUR 244m in 2007, wrote it all off in 2008) and is now also listed as an asset available for sale.

But Orange could look on the bright side and see that the market is changing while the “rags to riches” tale of safaricom success, as told by CEO Michael Joseph may never be replicated, the market potential is there; whatever mistakes they have made in technology selection, product rollout, and marketing can be fixed. Joseph is himself expected to retire by the end of the year taking away an intangible brand impact from the company, and a compromise is likely to be reached with 3G license cost, EASSY fibre, inter-connection rates and number portability which will ease the environment for new investors Essar (Yu), Bharti Airtel (who are buying Zain Africa assets) and Orange.

IPhone to Kenya

Today will see the official launch of Apple’s i-Phone (3G) into the Kenyan market by Orange mobile. You could say it’s a case of bad timing as Kenyans are going through tough economic times and perhaps entering a recession period.

Recession or not?: With (very) high prices of petrol (until recently), electricity, maize and other foods, a spike in the government deficit, global financial turmoil, fewer tourists, reduced remittance volumes all signs would point to an economic slowdown. Right?

But not the Central Bank of Kenya (CBK): I have been in the past ‘impressed’ (did I say it was the best bank site?) by the volumes of reports published by the Central Bank, mostly because they are timely, though difficult to decipher the message.

The CBK reports have predicted some hardships but remained very optimistic and rosy about the country’s economy. But it appears that the messages are tailored to suit the tone of the day because Kenya’s leading business newspaper has taken note.

Today’s Business Daily has a very harsh critique of the CBK reports (which many banks, funds, government departments use to formulate their policies). The BD editorial laments the consistency of presentation, shifting periods for which data is presented, differences in figures published by KNBS (statistics bureau) and a determination by its authors to manipulate data through a series of omissions and change of periods under review that makes it nearly impossible to keep track of ongoings in the economy.

Former Nairobi Stock Exchange boss Jimnah Mbaru (who’s also a sometime author) thinks Kenya is headed for a recession and has published a column which ran in some newspapers and appears at Capital FM website titled How Kenya can escape recession. He advocates (like US President-elect Obama) that the Kenya Government spend its way back to robustness. Some of the proposals he suggests include reduce interest rates and cash ratio (which have already happened) but also some strange ones like the government should buy Safaricom shares, sell buildings, and mandates that more sewers be built he also says hedge funds cashing out brought down the NSE this year…hmm.

Blog views: In the absence of a Finance Minister, the Government is engaged in a series of Voodoo economics.

i-Phone outlook: Looking around Nairobi with all the Hummers, new Range Rovers, new apartments complexes etc., it is clear that there’s an affluent class that does not feel the pinch of a (possible) recession and despite the tough year it has been, there have been several new entrants in Kenya.

The i-Phone which has been a worldwide smash, and impressed many (not all) its customers, can be expected to do well here also. Like with the Blackberry before it – which was circulating here unlocked/hacked before its official debut, it will now be licensed and supported after the official launch.

Kutwa Friday: Everything Must Go

It’s been a while since the last Kutwa post. Here’s a rundown of things, most from the daily papers and various sites that have piled up

Banking: Co-Operative bank are deep into the marketing program for their October 20 listing at the Nairobi Stock Exchange. They may also venture into mortgage finance
– Barclays and Standard Chartered will both offer mobile messaging services to their customers
– Rand Merchant Bank (SA) plans to expand to Kenya
– Salary cards are coming to Kenya as FNDS3000 Corp which launched its payroll card program in South Africa and will follow into Nigeria, Kenya, Tanzania, United Arab Emirates and Qatar

What’s in a Name?
a step forward: Telkom Kenya is now Orange: more on their new site and products

will they have orange phone booths?

– Nyanza petroleum dealers is now called Auto Xpress
– Chloride exide is now Chloride Solar
– The naming rights for Nyayo national stadium are up for sale to a corporate bidder (will it be Safaricom or Zain Stadium?)
a step back
– A new name is recommended for the discredited electoral commission of Kenya
– Grand Regency is now Grand Laicos Hotel?!

Developments: A new 21 storey 5-star hotel in Nairobi to be situated next to Barclays plaza (and is a stones throw away from the former Grand Regency)
– Kenya anti corruption to build a new headquarters
– Two battery recycling factories will be set-up; one in Changamwe and one in Konza
– Ethacom international will set up an ethanol production plant in in Bungoma
– Nairobi City council is seeking 50 acres for a new cemetery

Airlines: There’s little reporting about a pending strike of Kenya Airways engineers; however K24 TV reported that this may affect plans of President Kibaki to fly to London next week as engineers were going slow on maintenance of his planned aircraft and also other repairs after another little reported aircraft incident.

[image: KQ 777]

Energy: Following last months electric shock it was pleasant to see my electricity bill drop from 2,600 to 1,800 shillings ($26). No thanks to KPLC though, as the savings came largely from taking cold showers that reduced consumption from 161 to 115 units . Meanwhile there was another increase in KPLC fuel cost from 769c/kwh to 778c/kwh this month.

popular item in supermarkets

– Why doesn’t the government owned National Oil Corp (NOCK) who are supposed to check against check the high petrol prices charged by oil marketers sell petrol at the Kshs. 100 per litre (~$6.4/gallon) price that Energy Ministry says is correct?

– An S-class with the fuel economy of a Toyota? Pity Merc drivers are not concerned about fuel economy

ICT: The Kenya government plans to set up an official blog by September this year to facilitate better communication between the government and the public. “The blog will allow the government to respond to everyday issues being raised by the citizens,” PS Bitange Ndemo told journalists in Nairobi. “More and more people are turning to the internet to read, write or say whatever they want to say and if such forums were properly utilized, especially during the election period, we would not have experienced the kind of problems we had in the country at the beginning of the year.” hat tip Xinhua News – China
– Also the Kenya Government will set up a $39 million venture capital fund
– Telkom /Orange makes peace with Safaricom
– Controversy about an outsourcing scholarship
– Outsourcing #1: Pioneer BPO Kencall will manage call center for Telkom/Orange
– Outsourcing #2: site stats here show that Mauritius (9%) has overtaken the UK (8%) to be the third highest source of traffic to bankelele – after Kenya (45%) and the US (17%) – but, upon closer scrutiny for true fans there, it turns out the readers actually Kenyan-based – but routed through Mauritius.

Opportunities: The Skunk Awards 2008 is your chance to recognize and reward the leaders in the various ICT fields in Kenya. Chosen by YOU, the real stakeholders in the Industry. Vote for ICT Company of The Year, Best ISP, Most Innovative ICT product, Best Local Website, Best Local eCommerce Website, Worst Local Website, Best Local WebHost, Most Open Sourced (is that a verb) Organization, Best Customer/User Support, Worst Customer/User Support, Best Training Institute, Most Promising ICT Startup, Best Paying Company, ICT Entrepreneur of the Year, Best Local Application, Most Transparent ICT Tendering Govt Branch, Most Successful Government ICT project, and Worst Government ICT project. Send in your nominations to skunkawards@gmail.com before Friday October 10th.
– Apply online to be an Acumen Fund Fellow 2009-2010. D/L is 20 October
– Take part in the Wildman Triathlon in Watamu on October 18.
Zebrajobs is a cool new job site that has some interesting opportunities in this past of the world

Other jobs: You can’t compete with Kenya’s largest employer, the Government of Kenya. Soon available at the Governments Public Service site will be jobs including at the Ministry of finance principal accountants – 26 posts, chief accountants – 64 posts accountant II – 320 posts!; at the ministry of energy (director of renewable energy, senior deputy director of renewable energy (engineering) , senior deputy director of renewable energy (biomass) ) ; at the Ministry of immigration – immigration officer II – 200 posts; at the ministry of fisheries, chief fisheries officers – 142 posts, fisheries officers – 78 posts; and at the Ministry of medical services – Nursing officers III – 686 posts, clinical officers III – 548 posts, medical lab technologists – 124 posts and Pharmaceutical technologists III – 100 posts. The application process involves a mix of new and old technology – you can download the forms online but applications must be sent in by snail mail (post office) to the to the secretary PSC p o box 30095-00100 Nairobi by 13th October. Thereafter applicants can check the status of application by sending an SMS!

– Dyer & Blair: Database administrator, network specialist systems administrator. Apply through Manpower Associates by 26/9
– Econet wireless rolling out in Nairobi Mombasa Kisumu Eldoret (when?) is hiring head of field operations, field operations engineers, manager – RF optimization, RF Planning & optimization engineers, Manager base station sub systems, BSS engineers Regional managers – passive infrastructure . Apply to techrecruit@econet.co.ke by 29/9
Equity Bank is hiring credit officers, and debt recovery officers
– Genghis capital: head of stockbroking, head or research securities dealers. Apply by 10/10 to the head of HR at 9959-00100 Nairobi
– Gulf African bank: Area sales manager, manager product development (housing) credit administration manager, head of audit – apply to recruitment@gulfafricanbank.com by 22/9
– HLB ashvir: audit seniors audit manager – apply to audit@hlbashvir.com by 20/9
– KCB branch managers, Business bankers- apply to recruitment@kcbco.ke by 28/9