Friday, February 23, 2018

Profile of the telecommunications market in Kenya – part 5

See part 1part 2part 3part 4, part 5

Airtel Kenya

Airtel Kenya, the second largest operator in Kenya in terms of subscription numbers with a 15.3% market share, is one African national telecommunications unit of Airtel Africa, a subsidiary of Bharti Airtel the leading operator in India which entered the African market in June 2010 under the firm conviction that due to its size, financial resources, strong concentrated owner management and technical skills , also supported by a 32% holding by SingTel, and with its background in providing very lowcost mobile services in India it would be able to rapidly take a leading and profitable role in pan-African communications. At the time it set itself key three-year targets for sales (to reach $5 billion) and for EBITDA profitability. In the event it failed by a considerable margin to meet those targets. Since then Airtel Africa has continued to suffer financial problems and has been searching ways of restructuring itself so as to be more profitable.This has included selling off assets and exiting certain markets

In 2015, then chief executive Adil El Youssefi said the company would quit Kenya if regulations were not introduced to tame the dominance of market leader, Safaricom.

In the year to December 2016, Airtel Kenya made an after-tax loss of (KSh8.1 billion), making it one of Airtel’s worst performing markets in Africa.

In August 2017 Airtel Kenya showed current liabilities at KSh55 billion against KSh9.7 billion in current assets as at December 2016, making the company’s local operations technically insolvent. Data from CA indicated that Airtel’s market share shrunk three per cent in the previous quarter, with total subscribers standing at 6.1 million as at June 30, 2017.

In December 2017, based on an article in India’s Economic Times, which had interviewed Bharti founder and CEO Sunnil Mittal, several news-sources reported that Airtel Africa was planning to quit operations in Kenya , Uganda and Rwanda where its operating margins were very low.However the next day the company denied this but said it was open to some form of partnership. In late December 2017, it was reported that Airtel had acquired TIGO Rwanda for 6x projected EBITDA thus positioning itself both as a strong number 2 to MTN in the Rwandan market and also strengthening its overall commercial and financial position in the East African regional market. In October 2017 TIGO Rwanda was reported to have added 68,555 new mobile subscribers raising its total subscriber base to 3.45 million and raising its market share from 36.5% to 40%.

Telkom Kenya

This originally Kenya state-owned incumbent fixed-line Kenyan telco, was privatised in 2007 when it sold a 70% stake in itself to Orange Group (aka France Telecom). Orange managed it rather unsuccessfully for nine years during which it experienced losses and limited growth in the number of customers and revenue and also had frequent disputes with the National Treasury over the management of the operator. In mid-2016 Helios Investment Partners, a London-based private equity firm acquired the 70% share in the company and in  June 2017 the company rebranded itself, dropping the Orange brand and adopting Telkom as its new trading name. It also shed the old Orange corporate colour in favour of blue and yellow colours. At the same time, Helios ceded a 10% stake to the National Treasury, retaining a 60% shareholding while the Government saw its shareholding go back up from 30 to 40%

Jamii Telecom

In January 2012, broadband ISP Jamii Telecom announced a $3 million upgrade of its fibre network in anticipation of being able to bid for imminent government RFTs to supply broadband services in remote rural areas

In early December 2017 Jamii Telecom became the fifth mobile operator in Kenya and launched its “Faiba” 4G Mobile service and also became the first telco in Kenya to offer VoLTE. Voice calls are free and following  investment estimated in the range of $25 -$50 million in its network Jamii will offer HD voice and video

Wananchi Telecom Ltd

Wananchi Telecom was incorporated in March 2005 as part of Wananchi Group  Holdings which also included SimbaNet, iSat and Zuku. SimbaNet is a licenced public data operator; iSAT is a satellite teleport service provider and Zuku is an ISP and payTV provider. Wananchi Telecom is a tier one Kenyan data communications carrier . also a recognized international carrier, with operations in over 5 countries in the East African region and a presence in over 30 countries though own networks and partner integrated ecosystem. Wholesale services available include IPLC, MPLS L2/L3, DIA, Global IP transit, African and GGC peering and Colocation with access to a dedicated 247 NOC in Nairobi. In mid-May 2017 it was reported that with the aim of concentrating their resources on Zuku their residential telecoms business Wananchi Group had reached an agreement to sell the corporate internet and data unit Wananchi Business Services which included  SimbaNET, Wananchi Telecom and iSAT to Synergy Communications which is owned by African private equity fund Convergence Partners Communications Infrastructure Fund. However minority shareholders in a private equity firm, Africa Telecommunication and Media Technology Fund I (ATMT Fund I), that has a stake in Wananchi are currently litigating to prevent that happening,

MTN

MTN of Johannesburg, South Africa, is Africa’s largest pan-continental teico with annual sales of around $15 billion and mobile and/or fixed operations in around 23 countries which collectively serve almost 250 million subscribers. Most of these are in Africa but the company also has operations in Afghanistan, Cyprus, Iran, Syria and Yemen. MTN attempted to enter the Kenyan market directly in 2008 but had some difficulty in doing so and consequently acquired UUnet, a local cable TV operator. MTN followed this up in mid 2014 by acquiring a 33.3% share of pan-African internet group AIG(Africa Internet Group) which was a joint venture between Rocket Internet and Millicom International Cellular, founded in 2012 and had a presence in over 13 countries on the continent, including South Africa, Nigeria, Egypt, Morocco, Cote d’Ivoire and Ghana. Other investors in AIG ,which had a valuation of around $1 billion, have included AXA, Goldman Sachs and Orange. At that time AIG operated several separate e-commerce ventures including Zando(South African fashion company), Carmudi(online car sales) as well as Jumia, Kaymu, Jovago(travel), Lamudi(real-estate), Easytaxi and Hellofood all of which have operations in Kenya.

At the end of March 2017, MTN announced that it had opened a KSH 1.33 billion Kenyan  ($12.9 million),40 rack by 72 servers, data centre in Nairobi, Kenya, designed to offer a cloud service to SMEs mainly by reselling Microsoft’s cloud service Azure.

Liquid Telecom Kenya

Liquid Telecom Kenya is part of the pan-African Liquid Telecom Group which is itself part of the large Econet Group global conglomerate founded in 1993 by secretive Zimbabwean Christian billionaire and philanthropist Strive Masiyiwa, which is mainly focused on  global telecommunications but which also has investments in financial services, insurance, e-commerce, renewable energy, education, Coca-Cola bottling, hospitality and payment gateway solutions. Econet also has a Pay television outfit, Kwesé TV, which is already competing favorably across Africa with Naspers’ DSTV. Shares of the company have surged in value over the past year. In July 2017 Liquid Telecom successfully raised $700 million in a bond and term loan financing package from international financiers.

The Zimbabwe-listed  Econet Group has telecommunications interests in 17 countries and in late November 2017 Bloomberg reported that it was considering launching an IPO on the London Stock Exchange based on a valuation of $8 billion

 Liquid Telecom Group is dedicated to the ambitious aim of “bringing cheap affordable broadband services to the whole of Africa” and already operates in over 12 countries including Botswana, the Democratic Republic of Congo, Kenya, Lesotho, Rwanda, Uganda South Africa and Zambia, Zimbabwe and the UK via  50,000kms of cross-border, metro and access fibre networks together with a terrestrial satellite system designed to serve rural and remote areas

In late January 2013 Liquid Telecom acquired Kenya Data Networks from Altech from the Johannesburg Stock Exchange-listed Altech Group in a deal that would according to the company, make it the largest terrestrial fibre operator on the continent. Altech would get an 8.6% stake in Liquid Telecom and 10% shareholder voting rights. In addition to the assets, Altech would however also subscribe a further US $16.5 million for the stake.
In mid-December 2015 Liquid Telecom CEO Nic Rudnick announced that his company had issued a RFT(Request For Tender) to interested submarine cable builders for the construction over the next two years of a new “fully funded”, 10,000 km, 20-30Tbit/s capacity. fibre cable along the east coast of Africa which it had named Liquid Sea and which it said would link South Africa to the Middle East and thus to Europe and which would link to Liquid Telecom’s existing terrestrial network in Eastern, Southern and Central Africa and which would “include landing stations in several ports that are currently not served by existing subsea cables”

In late January 2016, Liquid Telecom announced that it had extended its Kenyan fibre services to  Garissa, the 120,000,mostly ethnic Somali inhabitants, capital town of Garissa County via a KSh60 million fibre network spanning over 21km which will be used to provide high-speed internet for Garissa County’s public, commercial and residential buildings.

In mid-August 2016 it was announced that in cooperation with Kisumu County government, Liquid Telecom Kenya was laying a KSh54 million,12.4km, metro fibre optic network in Kenya’s third largest city, Kisumu, located on Lake Victoria and with over one million residents, that was expected to boost Internet speeds in the lakeside city ten-fold and cover Kisumu central business district, Milimani and Kondele up to Kibos, Kicomi and Migosi junction. The new network was designed to integrate multiple local ICT systems including county information systems, schools, libraries, transport, hospitals, power plants, water supply networks and waste management.

In May 2017, it was reported that, after the expiration of a three year contract, former Airtel Kenya MD, Moroccan-born Adil Youssefi, had been appointed the new CEO of Liquid Telkom Kenya, replacing Ben Roberts, who would become board chairman of Liquid Telecom Kenya.

In early September 2017 Liquid Telecom announced that it was upgrading to 100G DWDM technology its East Africa Fibre Ring ,a fully redundant regional system with multiple routing options which was completed in 2014, and links together Kenya, Uganda, Rwanda and Tanzania, with onwards connectivity to Liquid Telecom’s fibre networks in Burundi and eastern DRC. It also offers direct access to international subsea cables. The upgrade enabled 100G links to the cities of Kigali in Rwanda, Kampala and Tororo in Uganda, and Nairobi and Mombasa in Kenya, with further 100G upgrades planned for the East Africa Fibre Ring in the near future.

In mid-October 2017, Ben Roberts MD of Liquid Telecom Kenya announced the signing of a Ksh 600 million, 40%/60%, 10 year agreement with Ketraco(Kenya Electricity Transmission Company), the country’s power transmission company that would enable Liquid Telecom to use Ketraco’s wire lines to extend fibre optic cables to counties such as Garissa, Isiolo, Garsen, Lamu, Rabai, Namanga, and Meru. As of 2015 Ketraco had 4,149km of transmission lines in operation, plus 4,489km planned or in construction and a further 4,207km expected to be installed over the longer term.

In early November 2017, Liquid Telecom announced that it would become a Microsoft Azure ExpressRoute partner across Africa when the Microsoft Azure cloud platform became generally available in 2018. Liquid Telecom CEO Nik Rudnick said his company would be adding CloudConnect nodes to over 25 PoPs across Africa, and also making major upgrades to Liquid Telecom data centres in Johannesburg and Cape Town thus enabling it to offer direct private connections to Microsoft’s South African ExpressRoute locations to businesses of all sizes in Africa

MVNOs

The leading Kenyan MVNO by far is FinServe Africa Limited’s Equitel which uses the Airtel Kenya network and serves over 1.7 million subscribers. Equitel which operates the Pesabank interbank money transfer system is now the second largest handler of mobile cash in Kenya after Safaricom. Two other MVNOs Sema Mobile and Mobile Pay also use the Airtel Kenya but neither has been very successful so far. Two other companies Lycamobile Kenya and Homeland Media Group have CAK licenses and are expected to enter the market soon.

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