BMI View: Kenya's telecoms sector is set to mature significantly over the coming years, as consolidation in the mobile sector eases price competition and enables operators to focus more on higher quality and a broader range of services. In the wireline sector, healthy competition between several well-funded operators is resulting in continued investment in fibre networks, to cater to consumer, enterprise and government demand for broadband services capable of supporting data-intensive services such as video on demand and cloud computing. Although the wireless sector too is expected to exhibit strong growth over the forecast period, BMI notes that recent state intervention in the mobile sector is a worrying development. On the upside, investments into the 3G/4G sector are expected to bode well for the data services consumption.
Kenya's mobile market grew by 2.6% quarter-on-quarter (q-o-q) in Q414 and 7.4% y-o-y to 33.633mn.
Mobile ARPU appreciation continued in 2014, with Safaricom recording a 5.5% year-on-year (y-o-y) increase in mobile average revenue per user (ARPU) in the 12 months to September 2014.
The rate of contraction in the fixed-line sector eased in 9M14, with number of active lines decreasing by 8.6% q-o-q in Q314, compared to 15.1% in Q313.
The number of internet users in Kenya increased by 10.8% in the 3 months to December 2014 to 16.4mn.
Kenya pulled ahead by one spot to ninth on BMI's Q315 Sub-Saharan Africa telecoms Risk/Reward Index (RRI), although the country's aggregate score dropped slightly from 47.4 to 46.7. Kenya scores above average in all the four categories on our ratings table. The industry rewards score is brought down by low ARPUs, but buoyed by strong remaining subscription growth opportunities. Meanwhile the launch of a more powerful telecoms regulator, the Communications Authority of Kenya (CA) in 2014 reflects the industry risks score of 70. Kenya's mobile telecoms market is one of the most dynamic in the region, but it is held back by the low ARPUs and limited network coverage in the fixed-line sector. The country already has one of Africa's most sophisticated economies and we forecast that rising incomes will see increased demand for the goods and services related to the rise of middle class consumers.
K ey Trends And Developments
French telecoms operator Orange Group has 'lost control' over its 70%-owned subsidiary Telkom Kenya, due to continuing disagreements with the Kenyan government, which owns the remaining 30%, and has failed to agree with Orange over any of its proposed solutions for the operator's financial problems. According to Orange, its loss of control refers to the fact that it is unable, as a majority shareholder, to take decisions and implement certain solutions to Telkom Kenya's financial difficulties. Orange will now account its investment in Telkom Kenya under the equity method from December 31 2014.
Kenya will launch 200 4G base stations in the country in April 2015. The stations will be set up in preparation for plans to equip the country with the fastest internet speeds in Sub Saharan Africa. Matiang'i said internet penetration in Kenya should reach 60% by 2017, the highest rate in Sub-Saharan Africa. Safaricom is expected to own the base stations. Also in April the Communications Authority of Kenya (CA) gave a permission to Airtel Kenya and Orange Kenya to begin testing 4G technology on their networks. The approval implies that the operators can start launching the service commercially.
Mobile operator Safaricom launched its LTE-Advanced (LTE-A) network in Nairobi and Mombasa in December 2014. The LTE-A network, which will offer peak download speeds of up to 100Mbps, is expected to reach other major towns in Kenya in the coming months. The operator is offering a free 4GB data bundle with several 4G-enabled smartphones and modems. Safaricom plans to launch a range of affordable mobile devices, which would include a phone priced at less than KES9,000 (USD98), in early 2015. Safaricom is also offering subscribers to its mobile financial services savings platform M-Shwari the option of purchasing 4G-enabled devices on credit. Subscribers will have to deposit 30% of the device's price into their M-Shwari accounts, prior to being advanced the loan, and pay the remaining amount within six months.