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Kenya - Telecoms, Mobile, Broadband and Forecasts

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Internet subscriptions almost double in 12 months

Kenya’s telecommunications and broadband market is undergoing a revolution following the arrival of three fibre optic international submarine cables (Seacom, TEAMS and EASSy), ending its dependency on limited and expensive satellite bandwidth. The countrys international bandwidth increased more than eleven-fold in 2011. Prices had already fallen significantly following the liberalisation of international gateway and national backbone network provision in 2005, but they have now fallen by more than 90%, enabling cheaper tariffs for telephone calls and broadband Internet services. However, ISPs have only reluctantly passed on the cost savings to end-customers, which has prompted the industry regulator, the Communications Commission of Kenya (CCK) to consider price caps. In parallel, the regulator has mandated price cuts on interconnection tariffs and proposed new competition regulations.

Companies that started out as ISPs – such as AccessKenya, Kenya Data Networks (KDN) and Wananchi – are transforming themselves into second-tier telecom companies by rolling out national and metropolitan fibre backbones and wireless broadband access networks, offering converged voice, data and video/entertainment services. At least six major deployments of WiMAX technology are underway, and third generation (3G) mobile broadband services have been launched. Advanced services such as IPTV/triple-play, e-commerce, e-learning and e-government are now rapidly evolving.

The country’s incumbent fixed-line telco, Telkom Kenya, is revamping its infrastructure and services under the Orange brand with fresh capital from its new majority shareholder, France Telecom, and it has also re-entered the mobile market. A simplified and converged licensing regime introduced in 2008 has lowered the barriers to market entry and increased competition by allowing operators to offer any kind of service in a technology- and service-neutral regulatory framework. Several fibre infrastructure sharing agreements have been forged.

A price war has characterised Kenya’s mobile communications market since 2008, following the market entry of the third and fourth network, Econet Wireless Kenya (EWK, in which India’s Essar acquired a stake), and Telkom Kenya under the Orange brand. Subscriber growth is now forecast to slow gradually over the coming years, and rapidly falling ARPU levels have driven one of the incumbents, Zain (which was subsequently acquired by Bharti Airtel), deeper into negative earnings, leaving only the market leader, Safaricom, with a net profit, although reduced. Financial performance has improved again in the 2011 financial year.

The operators are developing new revenue streams from third generation (3G) broadband and mobile banking services, and the leading operator has begun LTE trials. With market penetration rates in Kenya’s broadband and traditional banking sector still very low, the mobile networks have an opportunity to relive the phenomenal growth rates seen in the voice sector in recent years.

This report contains an overview of Kenya’s mobile, fixed-line, Internet and broadband market, its emerging digital economy, profiles of the major players in all market sectors, relevant statistics, analysis, and forecasts for the mobile and internet market to 2013 and 2016.

Market highlights:

Internet subscriptions almost doubled in 2011;
Fibre optic internet connections grow by more than 300%;
Decreasing ARPU under intense competition between four mobile networks;
Improving financial performance despite price war;
Strong growth in mobile data revenue from broadband and m-banking services;
Landing of international fibre bandwidth has revolutionised the market;
International internet bandwidth increases more than eleven-fold in one year;
Competing national fibre backbones enabling converged voice, data and video services at lower prices;
Profiles of major players in all market sectors;
The rebirth of Telkom Kenya under the Orange brand;
The emergence of new second-tier telcos;
Fibre infrastructure sharing agreements;
LTE trials;
Forecasts for Kenya’s mobile and internet market to 2013 and 2016.

Estimated market penetration rates in Kenya’s telecoms sector – end 2012
Penetration rate
(Source: BuddeComm based on various sources)

1. Key Statistics
2. Telecommunications Market
2.1 Overview of Kenya’s telecom market
3. Regulatory Environment
3.1 Kenya Communications Act 1998
3.2 Regulatory authority
3.2.1 Communications Commission of Kenya (CCK)
3.3 Revised Telecommunications Market Structure 2004
3.4 Kenya Communications Amendment Act 2009
3.5 Universal Service Fund (USF)
3.6 Tariff regulation
3.7 Interconnection
3.8 Number portability
3.9 Foreign ownership
3.10 New competition regulations 2010
3.11 Telecom sector liberalisation in Kenya
3.11.1 Regional telecom licences
3.11.2 Second national operator (SNO) licensing
3.11.3 International gateway licences
3.11.4 VoIP telephony
3.11.5 Converged licensing regime since 2008
3.11.6 BPO subsidies
4. Fixed Network Market
4.1 Telkom Kenya (Orange Kenya)
4.1.1 Fixed-line statistics
4.1.2 Wireless Local Loop (WLL)
4.1.3 Tariffs
4.1.4 ARPU
4.1.5 Privatisation
4.2 Fixed-wireless operators
4.3 Kenya Data Networks (KDN)
4.4 Jamii Telecom
5. Telecommunications Infrastructure
5.1 National fibre backbone infrastructure
5.1.1 Telkom Kenya
5.1.2 KDN
5.1.3 Kenya Power and Lighting Company (KPLC)
5.1.4 Kenya Pipeline Corporation (KPC)
5.1.5 Fibre infrastructure sharing
5.2 International infrastructure
5.2.1 Satellite
5.2.2 Terrestrial fibre
5.2.3 Submarine fibre
6. Internet Market
6.1 Overview
6.1.1 Internet statistics
6.2 Limited availability of PCs
6.3 Public internet access locations
6.3.1 Digital Villages
6.4 Internet backbone infrastructure
6.4.1 Telkom Kenya, JamboNet
6.4.2 Additional international data carrier licences
6.4.3 Public data network operators (PDNO)
6.4.4 Unified licensing regime since 2008
6.4.5 National fibre backbone networks
6.4.6 International fibre, internet bandwidth
6.5 Internet exchange points (IXP)
6.6 Kenya Network Information Centre (KENIC)
6.7 ISP market
6.7.1 Africa Online Kenya
6.7.2 AccessKenya
6.7.3 Wananchi Online
6.7.4 MTN Business Kenya (formerly UUNet)
6.7.5 Swift Global
6.7.6 InterConnect, Internet Solutions Kenya
6.7.7 Orange Kenya (Telkom)
7. Broadband Market
7.1 Overview
7.2 ADSL
7.2.1 ADSL2
7.3 Wireless broadband
7.3.1 WiFi
7.3.2 WiMAX
7.3.3 Mobile data services
7.4 Broadband via satellite
7.5 Leased lines
7.6 Fibre to the Home (FttH)
8. Digital Economy/Digital Media
8.1 Voice over Internet Protocol (VoIP) telephony
8.1.1 New VoIP guidelines 2005
8.1.2 VoIP licences
8.2 IPTV, triple play
8.3 Internet TV
8.4 Digital TV
8.5 E-learning
8.5.1 National research and education network (NREN)
8.6 E-commerce
8.7 E-government
8.8 Blogs
8.9 Facebook
9. Mobile Communications
9.1 Overview of Kenya’s mobile market
9.1.1 Mobile statistics
9.2 Regulatory issues
9.2.1 Interconnection
9.2.2 International gateways
9.2.3 Mobile Number Portability (MNP)
9.2.4 Quality of Service (QoS) control
9.2.5 Registration of subscriber details
9.2.6 Taxes
9.2.7 Tariff regulation
9.3 Major mobile operators
9.3.1 Safaricom Ltd
9.3.2 Bharti Airtel Kenya (formerly Zain, Celtel, KenCell)
9.3.3 Essar Telecom Kenya (Yu, formerly Econet)
9.3.4 Orange Kenya (Telkom Kenya)
9.4 Mobile voice services
9.4.1 Prepaid cards
9.4.2 Special regional tariffs
9.4.3 International roaming
9.4.4 VoIP
9.4.5 Flashback
9.4.6 GSM community phones
9.4.7 Price war
9.4.8 Low-cost handsets
9.4.9 Satellite mobile
9.5 Mobile data services
9.5.1 SMS
9.5.2 MMS
9.5.3 GPRS and EDGE
9.5.4 BlackBerry
9.6 3G
9.7 LTE (4G)
9.8 Mobile money transfer, m-banking
9.8.1 M-Pesa (Safaricom)
9.8.2 ZAP (Zain)
9.8.3 yuCash (Essar)
9.8.4 Orange Money
9.8.5 Other services
9.9 Mobile TV
10. Forecasts
10.1 Forecast internet users – 2013; 2016
10.2 Forecast mobile subscribers – 2013; 2016
11. Glossary of Abbreviations
List of Tables, Charts and Exhibits
Table 1 – Country statistics Kenya – 2012
Table 2 – Fixed-line statistics – 2012
Table 3 – Internet provider statistics – 2012
Table 4 – Internet user statistics – 2012
Table 5 – Mobile statistics – 2012
Table 6 – National telecommunications authority
Table 7 – Fixed lines in service and annual teledensity – 1999 - 2012
Table 8 – Internet users and penetration rate – 1999 - 2012
Table 9 – Internet/data subscriptions by technology and annual growth – December 2011
Table 10 – Internet subscribers by operator and market share – December 2011
Table 11 – AccessKenya corporate leased-line customers – 2006 – 2011
Table 12 – Mobile subscribers and penetration rate – 1999 - 2012
Table 13 – Mobile subscribers by operator and quarterly change – December 2011
Table 14 – Safaricom ARPU – 2007 - 2011
Table 15 – Zain Kenya ARPU – 2006 - 2009
Table 16 – Safaricom voice/data revenue composition and annual growth – 2011
Table 17 – Forecast internet users – 2013; 2016
Table 18 – Forecast mobile subscribers – 2013; 2016
Chart 1 - Fixed lines in service and annual teledensity – 1999 - 2012
Chart 2 - Internet users and penetration rate – 1999 - 2012
Chart 3 - Mobile subscribers and penetration rate – 1999-2012
Exhibit 1 – The CCK coup of 2005
Exhibit 2 – Emergency rescue scheme for Lake Victoria
Exhibit 3 – Texting elephants
Exhibit 4 – Job offers by SMS

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