Showing posts with label OND Research. Show all posts
Showing posts with label OND Research. Show all posts

Friday, February 23, 2018

Profile of the telecommunications market in Kenya – part 6

See part 1part 2part 3part 4part 5, part 6\

SECTION 5 National level networks

Kenyan National Optical Fibre Programme

The National Optic Fibre Backbone (NOFBI) is a project aimed at ensuring connectivity in all the 47 counties of Kenya both to ease communication across counties as well as improve government service delivery to the citizens such as the applications for national identity cards, passports and the registration of birth and death certificates.  The project is being implemented in 2 phases: NOFBI Phase 1 which started in 2007 and involved laying 4,300 km of cable and NOFBI Phase 2 which kicked in in 2014 and was designed to add a further 2,100 km of cable. The programme is being driven by the Government of Kenya with funding from the Chinese government, construction by Huawei, operation and maintenance by partially government-owned Telkom Kenya and oversight by the Ministry of ICT.

Other Kenyan optical fibre backbone projects

In mid-September 2015 it was announced that as part of the Eastern Africa Regional Transport, Trade and Development Facilitation Project the World Bank had released KSh 54 billion of funding to support the building over the next 2-3 years of major communication links between Kenya and the South Sudan including mainly  a $500 million superhighway between Lokichar in Turkana County in Kenya ("about 200 miles from the Sudan border )and the South Sudan borderpost of Nedapal  together with a fibre optic link which would cost KSh3.9 billion of which the Kenyan section would cost KSh2.4 billion. About 25% of South Sudan imports come from Kenya.

KENET The Kenyan Educational Network

KENET provides broadband internet services, by connecting member institutions to national and global internet It has PoPs in Nairobi(at the University of Nairobi and the United States International University) as well as Meru, Kisumu, Eldoret, Nakuru and Mombasa. KENET have access to a 10Gb/s Internet connection that is dedicated to education and research. Researchers and educators can transfer larger data sets per day between campuses in support of their research, as well as access grid computing infrastructures and high-performance computers. Students and staff have access to commodity Internet (educational videos, Wikipedia, YouTube, Facebook, coursera, etc) through dedicated commodity connections, supported by peering arrangements and caches for major content providers.

As of September 2017, KENET was providing Internet services to 220 campuses in different parts of Kenya. By September 1, 2017, KENET was generating over 13 Gb/s Internet traffic, about 60% being Google traffic (Google PoP in Mombasa and Google cache) and 6% Akamai traffic. KENET had a national distribution capacity of over 27 Gb/s consisting of leased lines and KENET dark fiber with 83 universities on a 1 Gb/s port to the KENET backbone network. KENET also peers directly with GEANT and London Internet Exchange in London through UbuntuNet Alliance, and is now connected to Africa Connect providing direct connections to African NRENs (e.g., RENU in Uganda, ZAMREN in Zambia and TENET in South Africa).

SECTION 6 - Specific end markets

Money transfer market

In mid July 2017, the Kenyan Wall Street reported that Visa was taking on both MPESA and Pesalink by announcing a partnership with nine Kenyan banks namely Barclays Bank; Cooperative Bank; Ecobank; Family Bank; KCB Bank: NIC Bank; Prime Bank; National Bank of Kenya; and Standard Chartered Bank; to offer free money transfer using Visa’s mVisa system hosted on its Visanet network. The report added that mVisa would now also be accepted at a number of merchant locations across the country through Direct Pay Online and Jambo Pay and noted that the countries in which mVisa was engaged Included live systems in Kenya, India, Rwanda and Egypt with plans to launch in Nigeria, Uganda, Tanzania, Ghana, Indonesia, Kazakhstan, Pakistan and Vietnam underway.

e-commerce and mobile payments market

Kenya’s e-commerce sector is currently dominated by brands such as Jumia, Kilimall, OLX, Pigiame, among others. In November 2017, Safaricom announced that it planned to enter this market with its Masoko(=“markets” in Kiswahili) product which would start with 200 vendors and about 30,000 consumer goods ranging from electronics to food and would provide a platform for merchants to trade goods on social media sites. Independent observers expected Safaricom to face stiff competition from market leader Jumia which four year after its launch now supports 5,000 vendors and about 500,000 products listed on its e-commerce.

SECTION 7 - Major Kenyan communications systems vendors 

Huawei

Huawei appears well embedded in Kenya across a broad range of products and, services including as noted above being responsible for constructing a national fibre network linking all 47 Kenyan counties. With an estimated, 5,000 staff in Africa and operations in 40 countries including R&D groups in Angola, Egypt, Nigeria and South Africa Huawei has adequate economies of scale in the continent where based on its global sales one might expect it to be doing up to $2 billion of business

In August 2010, it was reported by Business Daily Africa that Safaricom had signed a three-year contract with Huawei for the supply of its core network requirements, and roll out of a 4G network at a cost of KSh12 billion ($143 million).

In July 2012, Business Daily Africa reported that Huawei had secured an exclusive tender to build a KSh6 billion national fibre optic infrastructure and e-government projects expected to start in August which would link Nairobi with 36 other towns through a Wide Area Network (WAN).

In November 2016, Safaricom and Huawei announced that they were celebrating 14 years of partnership which had included the modernisation of Safaricom’s network infrastructure for both 2G and 3G as well as key involvement in Safaricom’s Transmission, core network and CBS billing system as well as in the implementation of M-PESA the revolutionary money transfer system owned by Safaricom’s parent company Vodafone.More recently the companies had partnered for the rollout of 4G LTE and the national police surveillance system. In the report, Huawei claimed its mobile phone share in Kenya was around 10% at that time but it was targeting a 20% share using a range of phones. Including ultra low-cost phones selling at KSh5,000 In August 2017, Safaricom and Huawei announced that in order to accelerate the introduction of FTTH in Kenya Safaricom would adopt Huawei's end-to-end (E2E) FTTH solution.

Safaricom's plan is to utilize existing metropolitan area network (MAN) optical cables and preferentially use aerial cables. The architecture also looks to integrated the fixed broadband optical distribution networks (ODNs) with Safaricom's mobile backhaul networks. This enables Safaricom to deploy mini optical line terminals (OLTs) and wireless base stations in the same cabinet, realizing fast deployment and decreasing network construction costs.

In summary, although Kenya is now beset by a very difficult political/tribal conflict, the nation's overall telecommunications market has been improved significantly over the past decade and is positioned to continue forward progress in delivering better digital services to all corners of the land.

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, Kwes√© 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.

Thursday, February 22, 2018

Profile of the Telecoms market in Kenya - part 4

See part 1part 2part 3part 4part 5part 6\

MARKET SHARES

Mobile subscriber unit market shares

Based on operator returns to the regulator the following were the unit market-shares by operator during the quarter.

                                          Share             COMMENT
Safaricom                          71.9%          up slightly to 29.49mn from 29.23mn
Airtel Kenya                     14.9%         down slightly to 6.10mn from 6.18mn
Telkom Kenya                    8.4%         up significantly to 3.44mn from 2.90mn
MVNO  Finserve/Equitel   4.7%          up moderately to 1.91mn from 1.86mn
Mobile Pay Ltd                   0.2%          up to 0.089mn from 0.088mn
Sema Mobile                    Negl

Mobile money transfers market shares - by money transfer system



Subscribers
in millions
Market Share
Transactions in millions
Value KSh
In billions
M-Pesa
22.79
80.8%
428.77
1334.74
Airtel Money
1.63
5.8%
2.47
1.15
Equitel Money
1.91
6.8%
104.79
322.42
Mobikash
1.77
6.3%
0.82
0.13
Mobile Pay
0.089
0.3%
0.40
1.46
TOTAL
28.19
100.0%
537.24
1659.89


NB There are 184,137 agents involved of which 143,126 support M-Pesa

It is not clear why Airtel Money has such a low value for transactions  There are additional figures on mobile commerce transactions and Airtel seems relatively stronger in that sector though not obviously enough to justify the difference

Fixed/wireless data/internet subscriptions market shares


Q1 2017/8
% Market Share
Wananchi Grp Ltd.
107,640
41.0
Safaricom
40015
15.2
Jamii Telecommunications
34975
13.3
Mawingu Networks
29905
11.4
Argon Telecom services
20553
7.8
Access Kenya Grp
15004
5.7
Liquid Telecoms Kenya
7690
2.9   
Telkom Kenya
3,856
1.5
Iway Africa Kenya
997
0.4
Mob:Tel:  Networks Business Kenya
583
0.2
Other
1,574
0.6
Total subscriptions
262,792
100.0




 NB This covers all non-cellular data internet sectors

SECTION 4 —Short profiles of the main operators

Safaricom

Safaricom was started in 1993 as a department of the former state-owned telecommunications company,Kenya Post and Telecommunications Corporation but is now owned 35% by Vodacom of South Africa(which is owned 65% by Vodafone of the UK), 35% by the Kenyan Treasury, 5% directly by Vodafone of the UK and 25% by the general public.

Safaricom provides a wide range of integrated residential and business telecommunication services, including mobile and fixed voice, SMS, data, Internet and M-PESA, a service to send and receive money or pay for goods and services through a mobile phone.

Due to Safaricom’s dominant share of the Kenyan mobile market, there have been frequent calls for the company to be broken up into separate retail and wholesale companies and for some time the CA was said to be considering whether Safaricom had abused its position and whether its various businesses should be disaggregated. Finally, on January 4th, 2018 the CA announced that it had decided not to take any action on this issue.

Safaricom is Kenya’s most profitable company and claims to support over one million workers directly and indirectly. For the year to March 2017, Safaricom reported revenues of KSh 212 billion.

For the first halfyear of 2017/18 ended September 2017, Safaricom reported good growth boosted by a strong performance by M-Pesa and data while traditional services such as voice remained resilient.

Specifically
1. Total revenues rose 12.1% to KSh114.43 billion(=$1.110 billion)supported by
-M-Pesa revenues up 16.2% to KSh30.05 billion
-Data income up from KSh13.4 billion to KSh17.55 billion.
-Voice revenue, which is still Safaricom’s biggest income stream, up from KSh45.7 billion to KSh47.35 billion.
-Messaging revenue up 3.4% to KSh8.92 billion.

2. PAT grew 9.5% to KSh26.2 billion for the six month

Safaricom is a key contributor to the Kenyan Treasury through its payment of substantial taxes and dividends. In mid-December 2017 the Central Bank of Kenya in its weekly bulletin reported that the company had just paid KSh16.2 billion($157.3 million at KSh.0097 to the dollar) dividend to the Kenyan government.

In early September 2017, Safaricom CEO, Bob Collymore, speaking to the Financial Times of London said the company was planning to market some of its services , notably Masoko, a service which combined e-commerce and mobile payments to four or five of its neighbouring countries, including Ethiopia, though he admitted the latter initiative might not be easy given the limited private sector in that country.

As of late 2017, Safaricom was reported to have provided FTTH services to 81,000 homes in 19 neighbourhoods in Nairobi including South B and Pangani as well as Ngong and Rongai in Kajiado County.

On December 11th 2017, Safaricom announced that for the first time ever, Kenya had achieved the milestone of 1 million active 4G customers in customers. Safaricom is currently the only operator providing LTE commercially. It said the milestone was achieved following network expansion, increased affordability of 4G smartphones and more affordable data bundles.

Monday, February 19, 2018

Profile of the telecommunications market in Kenya

Preamble: On January 30, 2018, Kenyan authorities ordered the nation’s three leading television stations off the air for their attempts to cover the alternate and unsanctioned "inauguration" of opposition leader Raila Odinga, who claims to have prevailed in last year’s disputed election against President Uhuru Kenyatta.  The High Court of Kenya has ordered the government to allow the stations to resume operations but as of February 03, 2018 the mass communications market remains disrupted. As of Sunday evening, the censorship remains in place and tensions are high, however, telecom and Internet services appear to be operating normally.  In this series of articles, we profile the vibrant telecommunications market in Kenya.

See part 1part 2part 3part 4part 5part 6\

SECTION 1. General political, social, physical and economic overview of Kenya

The total population of Africa according to the U.N. Worldometer as of Friday, January 31st, 2018, was circa 1,274,779,000 and the annual growth rate of this population over the last five years has been about 2.56% per annum. Population density for the country is 42 persons per sq km and the median age of the population is 19.4 years. The level of urbanisation is 42%. According to the IMF’s World Economic Outlook estimates of October 2017, the nominal GDP of the 54 countries sovereign nations in Africa in 2016 was $2140.621 billion.

Kenya’s population is almost exactly 4% and its nominal GDP 3.2% of the respective African totals.

Social, economic and political overview

Kenya, located in East Africa with an over 500 km long coast on the Indian Ocean is the world’s 28th largest country in terms of people with an UN-computed population as of the end of January 30th 2018 of 50,420,895. The country’s official languages are Swahili and English but it is extremely diverse ethnically, hosting around 42 different communities including (according to the CIA Factbook) Kikuyu 17% Luhya 14% Luo 11% Kalenjin 13% Kamba 10% Kisii 6% Meru 4% Other African 13% Non-African (Asian European, and Arab) 1%. (NB There are many different versions of this analysis with some claiming Kikuyu represent up to 22% of the population— but this does not change the general ethnographic picture).

The country is of average size for the region, ranking 20th in Africa and 48th in the world. It is not very densely populated (apart from the capital Nairobi and its huge slum of Kibera, located 4 miles from the city centre and described by Wikipedia as “ the largest urban slum in Africa”though estimates of its actual size seem to vary ludicrously from as low as 170,000 to as high as two million people ).

Kenya  is roughly bisected by the Equator, and is geographically very diverse with features that include Mt Kilimanjaro in the extreme south, (the highest mountain in Africa, about 4,900 metres from its base to 5,895 metres above sea level), Lake Victoria, the world’s second largest freshwater lake in the far east, Mt Kenya, (only 12% lower than Kilimanjaro) on the Equator and Lake Turkana in the northwest. Due to its position, the majority of Kenya consists of arid or semi-arid plains and hills including a major desert in the north of the country. These areas offer sparse grazing and habitats for a variety of wildlife as well as tough local breeds of domesticated animals.  6% of the country is forested and about 15-20% is said to be suitable for agriculture.

According to the IMF, Kenya in 2016 with a GDP of $68.919 billion and a nominal GDP per capita of only $1,370 was the world’s 71st richest country. In October 2017 in its World Economic Outlook,  the IMF said it expected the Kenyan economy to grow by 5% in 2017, slightly lower than their projected growth of 5.3% in April and well below a 6% forecast in January 2017.

Political mess in Kenya after two disputed elections

Kenya is a federal democracy with separation of powers of the judiciary, the parliament and the executive run by the president and a degree of autonomy for its 47 counties each of which has its own governor.

However this theoretically democratic political system remains in a difficult state following a disputed August 2017 election nominally won by the Jubilee Alliance under incumbent president Uhuru Kenyatta, an ethnic Kikuyu, followed by an October 26th 2017 unopposed election rerun (in which Kenyatta received 96% of the vote) which was boycotted by the National Super Alliance( NASA) opposition under ethnic Luo Raila Odinga, (previously PM of Kenya from 2008 to 2013) and over five months of electoral chaos and bad-tempered arguments between the two factions.

On November 29th, 2017, Uhuru Kenyatta was officially sworn in for another term. However, the NASA opposition has consistently refused to recognise the results of either election and in a dramatic show of defiance, Raila Odinga announced that he would carry out a separate duplicate ceremony on January 30th, 2018 in which he would be sworn-in as president. To support that action NASA have fabricated a case that had the election been fair Raila Odinga would have actually beaten President Uhuru Kenyatta in the August 8 election after garnering 8,104,744 (50.54%) votes to Uhuru's 7,908,215 (48%) votes. On January 30th Odinga did, in fact, carry out this ceremony but it seems it was not very well attended and even Odinga himself was muted in his behaviour and altogether the event was something of an anticlimax. At the same time, the government switched off five TV stations and several radio stations to avoid giving Odinga free publicity.

Relative to its rather limited resources and wealth Kenya has quite a sophisticated social environment not least due to probably one of the most competitive and innovative telecommunications markets in Africa

Telecommunications market overview

Kenya has a strong mobile communications market with around 40 million subscriptions but only a tiny fixed-line market of around 70,000 lines. Traditional copper line subscriptions continue to decline steadily but there has been rapid growth from a low base in demand for optical fibre connections.

Based on the fact that the main operator Safaricom has around a 70% share of most markets and the fact that its annual sales are around $2 billion the total Kenyan services market would appear to be worth around $3 billion or almost exactly 4% of the country’s projected 2017 GDP. This is a little on the high side compared to global norms but can be partially explained by the unusual extent to which Kenyan citizens have taken up mobile banking, mobile payment and e-commerce, with Safaricom being a particularly strong supplier of the first two services.

to be continued

Wednesday, February 7, 2018

Market Update for India

We think of India as having one of the fast growing mobile market in the world. There is a huge population of unconnected or under connected citizens with a strong desire to join the online economy. Most likely, that connection will be mobile broadband.

While India does indeed have the faster growing mobile operator—Reliance Jio, which zoomed from zero to 160 million in only 16 month (for comparison, Verizon has 116.3 million retail connections) – the nation is shrinking month by month in terms of total mobile lines in operation.

How can this be? One aspect of the Indian market is that SIM cards are relatively cheap, and monthly service plans are also inexpensive.  Even for high-flying Reliance Jio, the average revenue per user (ARPU) per month is only 154 rupees (approximately $2.41).  On top of this, most users are enrolled in pre-paid plans. There is also the aggressive promotions whereby operators make great offers just to more SIM cards activated. As a result, many people with financial means will pick up multiple mobile phones and SIM cards, never bothering to cancel them is the ongoing maintenance cost is low enough.

This tends to distort the reported figures for market growth and gives us an unreliable picture of the relative strengths of each operator.

A consolidation is certainly underway. Of India’s twelve mobile operators, only five gained subscribers while seven operators experience declines. The winners are Bharti, Vodafone, Idea, Reliance Jio and BSNL. The losers are Aircel, Reliance, Tata, Telenor, MTNL, Sistema, and Quadrant.

The total number of wireless subscribers (GSM, CDMA & LTE) in India dipped for a second quarter in a row in Q3 2017 to 1,183.04 million, down from from 1,186.79 million at the end of Jul-17, according to the latest figures compiled by Telecom Regulatory Authority of India (TRAI) . Urban subscribers numbered 684.77 million compared to 498.28 million rural subscribers. Wireless teledensity declined from 92.12 at the end of Jun-17 to 91.56 at the end of Sep-17.

Some metrics:

  • Monthly ARPU GSM Full Mobility Service including LTE – 84 rupees
  • Monthly ARPU CDMA Full Mobility Service – 125 rupees
  • Minutes of Usage (MOU) per subscriber per month - GSM Full Mobility Service including LTE - 437
  • Total Outgoing Minutes of Usage for Internet Telephony – 283 million
  • Average Data Usage per subscriber per month – GSM (2G+3G+4G) - 1,610 MB
  • Average outgo per GB data for GSM including LTE (2G+3G+4G) – 21.22 rupees
  • Gross revenue for telecom operators in India (mobile and fixed) rose by 2.27%. The government statistics show that monthly Average Revenue Per User (ARPU) for Access Services was 88.09 rupees (US$1.37) as of 30-September-2017.
  • Not surprisingly, the number of wireline subscribers declined from 24.00 million at the end of Jun-17 to 23.67 million at the end of Sep-17 with quarterly decline rate of 1.37%.  However, it is strange that the number of Internet subscribers declined from 431.21 million at the end of Jun-17 to 429.23 million at the end of Sep-17, registering a quarterly growth rate of -0.46%.


Friday, January 5, 2018

Telecoms Market Update: Singapore

by James E. Carroll

Singapore, which boasts the world’s highest mobile penetration rate at over 150% and which has been ranked as the most "Tech-Ready Nation" by the World Economic Forum, is often cited as a living laboratory for advanced communication services given the compact size of this city-state and its excellent overall infrastructure.


In the telecoms sector, Singapore is a mix of state-owned incumbent operators (SingTel and to a lesser extent Starhub), tight regulatory and media controls, and small business start-ups. As we enter the 5G era, it is worth tracking the changes underway in this very dynamic market.
Singapore’s official regulatory body for telecoms and media, the Infocomm Media Development Authority (IMDA), has published an Industry Transformation Map, setting out the vision for transforming the city-state into a fully digital economy. The goal is to grow the media and communications at a 6% CAGR, roughly twice as fast as Singapore’s overall economy, creating approximately 13,000 new jobs. This would mean 210,000 workers would be directly employed by companies in this sector by 2020, compared with 194,000 in 2016. 

Singapore’s Industry Transformation Map has three main thrusts:
  • One – invest in the four “frontier technologies,” namely Artificial Intelligence and Data Analytics; Cybersecurity; Immersive Media; and Internet of Things;
  • Two – strengthen the core of the ICM sector and focus on education for the next generation of ICM professionals and companies;
  • Three – guide companies and workers from the other sectors to adopt digital technology to improve productivity and efficiency.

Encouraging investment and education has long been core to Singapore’s DNA. These are the principal factors which have made Singapore so successful to date.

The four frontier technologies are not surprising either. Everyone is chasing these four sectors, but Singapore’s ambition is better planned. In May 2017, a fund called AI Singapore was set up with S$150 million to catalyse, synergise and boost AI capabilities. A nine-month AI Apprenticeship Programme (AIAP) has also been established offering a blend of classroom, online and hands-on project work. The first AI apprenticeships will begin in March 2018.

The AI Singapore ecosystem currently consists of National University of Singapore (NUS), Nanyang Technological University (NTU), Singapore Management University (SMU), Singapore University of Technology and Design (SUTD), and Agency for Science, Technology and Research (A*STAR).
The third thrust is interesting as it entails building a community between developers and users. This will take the form of a Strategic Partners Programme (SPP), which formally got underway in July. 
New collaborations with Memoranda of Intent (MOIs) were signed in November with three platform partners namely, IBM, Microsoft and Samsung to groom selected Singapore-based tech companies in their respective ecosystems.  IMDA expects these new partnerships to benefit between 80-100 companies. Huawei is also a strategic partner, signed in July 2017, with a goal to propel 35 Singapore-based tech companies.

The current market situation

There are three major networking infrastructure providers in Singapore, SingTel (Singapore Telecom, the previous incumbent operator), Starhub and M1. A fourth competitor, Australia-backed TPG Telecom, has regulatory clearance to enter the market and has launched initial services.  A local ISP known as MyRepublic is also attempting to become a mobile operator.



A brief background on StarHub

When Singapore first moved to abandon the monopoly status of SingTel in 1998, StarHub soon emerged as the likely favourite challenger. Starhub launched officially in April 2000 with the ST Telemedia, Singapore Power and two very powerful international carriers, namely, BT Group and Nippon Telegraph and Telephone (NTT). The new venture bought out some local ISPs and then merged with Singapore Cable Vision. During these early years, StarHub launched its mobile network and, with that, quickly established itself as a top consumer play for mobile, cable TV, and broadband Internet service. These consumer services remain core to the company today.

Temasek Holdings, which is a sovereign wealth fund of the Government of Singapore, holds an approximate 56% share of Starhub. The market capitalisation of Starhub is around S$5.032 billion (US$3.73 billion).

In 2009, Starhub was selected by Infocomm Development Authority of Singapore (IDA) to design, build and operate the active infrastructure of the Next Generation Nationwide Broadband Network (Next Gen NBN). Four proposals were considered: Intellinet (Axia + Cisco), Kliq (M1), 1NNOV8 (Singtel) and Nucleus Connect (StarHub). The OpenNet consortium backed by SingTel was selected to serve as the Network Company (NetCo) of the Next Gen NBN. Under the NBN structure established by the government, the NetCo (OpenNet) is responsible for deploying fiber while the OpCo (StarHub) is responsible for delivering wholesale services to Retail Service Providers (RSPs).

StarHub in 2017 has been flat or mostly declining, except Enterprise

In Q3 2017, StarHub reported revenues of S$580.4 million, down 0.8 % compared to a year earlier. The slight decline was mainly attributed to lower service revenues from Mobile, Pay TV and Broadband services, along with lower sales of equipment. These trends have been playing out for the whole year, as the nine-month report showed a decline of 0.6% overall.

One positive area cited by the company in its quarterly report was Enterprise Fixed service revenue. The growth in fixed service revenue was partly due to the consolidation of Accel Systems & Technologies Pte Ltd (ASTL), a newly acquired cyber security solutions provider.

Revenue for PayTV services for StarHub continue to decline as they lose customers. StarHub’s income also declined as the government trimmed NBN grants by S$4.1 million in Q3. In Q3, StarHub’s CAPEX to sales ratio was 9%, fairly low for a network operator.

For its mobile division, StarHub’s subscriber base at the end of Q3 was 2.256 million, down from 2.275 million the previous year. PayTV is down 10k from last quarter and about 40k since last year. Broadband decreased by 1k over the last quarter and 9k over the last year.

CEO to step down, looking for new talent possibly from abroad

On November 17, 2017, StarHub CEO Tan Tong Hai announced his resignation, effective May 1, 2018. He has served as COO since 2009, later being promoted to the chief executive role in 2013. Under his leadership, StarHub underwent many changes, most significantly transforming from a strictly consumer-oriented service provider to include enterprise networking services. Sales to enterprise customers have grown to more than S$ 900 million annually. He chalked up several other notable achievements, including the acquisitions of mm2 Asia and Accel Systems & Technologies, the launch of an integrated fiber and cable home broadband solution, and the transition to an IPTV service.

The company has indicated that they are conducting a global search for his replacement. This is interesting because it suggests that StarHub may consider business ventures outside of Singapore going forward.

Another milestone this year has been the acquisition of Accel Systems & Technologies, a local cybersecurity specialist whose capabilities are expected to bolster StarHub’s enterprise portfolio. Accel will operate as a wholly-owned subsidiary.

Expanding the mobile infrastructure partnership with M1

For many years, StarHub has partnered with rival M1 to share mobile infrastructure costs. This has included combined antenna systems, in-building fibre and tunnel cables. In January 2017, the companies agreed to expand this relationship to include sharing radio access network, backhaul and access assets. It does not include the individual mobile core networks or support systems. The companies continue to compete for consumer mobile services. This infrastructure sharing agreement should benefit StarHub as it begins to roll out 5G.

APG submarine cable brings the capacity for new services, better prices

One of the factors contributing to the rise of StarHub’s enterprise division was the activation in late December 2016 of the Asia-Pacific General (APG) submarine cable network system. This added significant international capacity on the StarHub network. APG is a 10,900 kilometer submarine cable linking Mainland China, Hong Kong, Japan, Korea, Malaysia, Singapore, Taiwan, Thailand and Vietnam. APG gives StarHub direct access to telecom partners in each of the countries with a landing station, such as Shanghai Nanhui, Chongming as well as Hong Kong, where major Chinese telecommunication providers deliver connectivity and ensure competitive access to multinational businesses.

“Singapore is China’s largest foreign investor. To serve Singapore enterprises expanding to China, we are pleased to provide them with a new international connectivity on APG, catering for the growing economic activities between China and Southeast Asia,” said Benjamin Tan, Vice President of International Business, StarHub.

StarHub’s partnership with APG is also significant because it increases route diversity to other Asian countries via submarine cables such as Asia-Pacific Cable Network 2 (APCN2), Asia Submarine-cable Express (ASE) and Asia-America Gateway (AAG).

Vodafone partnership opens a door to the outside

Unlike Singtel, which has numerous overseas investments and partnerships, StarHub has generally focused on only its local operations. Its most significant overseas partnership is with Vodafone, with whom it began a relationship four years ago, focused on mobile connectivity as well as co-branding and knowledge sharing initiatives. In November 2016, the companies agreed to expand this relationship to include high-speed data on Vodafone’s 4G networks for consumers. The partnership also gave a boost to StarHub’s enterprise services by helping them expand their businesses overseas via Vodafone’s International Enterprise network.

What’s next for Starhub?

In terms of revenue mix, mobile services have accounted for approximately 50% of Starhub’s turnover for past few years, with PayTV making up 15%, Broadband 8%, Enterprise 16% and sales of equipment (mobile phones, home gateways, etc.) making up the rest. There is little churn in Singapore’s mobile market but ARPU is falling as operators offer more and more generous data packages to subscribers. In the Pay TV segment, cord cutting continues to take hold. Starhub is losing subscribers every quarter even as it adds content with unique media partnerships. In broadband, Singapore’s excellent Nationwide Broadband Network (NBN), of which Starhub is a foundational player, delivers great performance/value to consumers but makes it difficult for operators to differentiate their services.  Outgoing CEO Tan Tong Hai has been right to focus on Enterprise services as a big growth opportunity, bring competition for advanced services and international connectivity to Singapore’s business community. Is it time to seek expansion opportunities abroad?

An Overview of Singtel’s international operations

The Singtel Group has been one of the most internationally expansive mobile operators, putting it in the category of Vodafone, Orange, Telefonica, Digicel, Etisalat and Zain. While most of the world’s mobile network operators find success only in their home market, Singtel is quite the global player. But instead of using its own brand wherever it goes, like Orange, the Singtel Group typically invests in a local player, keeping its distinct Singtel logo and Singaporean identity out of the public eye.
Through its six overseas investments, the Singtel Group currently touches 670 million mobile customers in 22 countries, with the largest concentrations being in India, Indonesia, the Philippines, and Thailand. In contrast, the population of Singapore is only 5.6 million – so you could say the company broadened its reach 100x by pursuing outside opportunities. For its own data network, Singtel has 370 PoPs in 325 cities.

Singtel’s major overseas holding include:

Australia - Optus – 100% share – Australia’s No. 2 mobile operator with 9.8 million customers for a 29% share of the market. Over 6 million of these subscribers are on the 4G network. The network footprint covers 95% of the population. Optus also serves 1.2 million broadband customers in Australia. For its most recent quarter, Optus delivered strong free cash flow of A$267 million up 21 percent from a year ago, despite higher capital investment in the network. Optus operating revenue was stable year-on-year at A$2,117 million with growth in mobile, mass market fixed and ICT & managed service revenues offset by lower equipment revenue.  Over the past few months, Optus went live with the world’s first three-carrier channel aggregation massive MIMO in Sydney, delivering speeds of over 800 Mbps. Optus expects to roll out this technology to other capital cities in the next six months.
Optus has also moved quickly down the path to transform into a mobile-led, multimedia content provider. The first step was the launch of Optus Sport, a 24/7 sports channel with on-demand and live multi-screen capability to broadcast Premier League football.  This has proven popular. Optus users have watched almost 13 million hours of Premier League and international football content including live matches, highlights, and expert analysis, since launch in 2016. Optus also offers data-free music and content streaming in selected prepaid and postpaid plans.  Its streaming partners include Netflix, Stan, ABC iView, Spotify, Pandora, iHeart Radio, and Google Play.

India – Bharti Airtel, in whom Singtel holds a 36.5% effective interest. Airtel is still the no.1 mobile operators in India with approximately 282 million customers for a 24% market share.  However, Airtel is under intense pressure from Reliance Jio, which is really shaken up the market with low pricing and generous data allowance. Earning here are under threat.
Through Bharti Airtel, which has its own international expansion strategy, the are 2 million more customers in southeast Asia and 82 million customers in Africa (Ghana, Niger, Chad, Gabon, Congo, DR of Congo, Zambia, Uganda, Rwanda, Kenya, Tanzania, Malawi, Madagascar, and the Seychelles..

Indonesia – Telkomsel, in whom Singtel holds a 35% share. Telkomsel is no.1 in Indonesia with 190 million mobile customers for a 47% share of the market. Most recently, the company posted its fifth straight year of double digit revenue growth.

Thailand – AIS, in whom Singtel holds a 23% share. AIS has 40 million mobile customers, ranking it no.1 in the country with a 45% market share. The carrier has rapidly expanded its 4G network over the past year and now covers 98% of the population.

Thailand – Intouch, in whom Singtel has a 21% share. Intouch is an active investor in local telcos and media, and technology firms.

Philippines – Globe, in whom Singtel has a 47% share. Globe has 59 million mobile customers, giving it a 50% market share. For the first nine months of 2017, Globe’s service revenues climbed 6% over last year.  There were 3 consecutive quarters of record revenues for both mobile and home broadband. Mobile data contributed about 43% of total mobile revenues for the first nine months of 2017, versus 38% a year ago. Mobile data service revenues reached P31.3 billion as of end-September 2017, or 20% above the P26.1 billion reported in the same period last year driven by higher data usage and the continued growth in smartphone penetration, which increased to 70% for the period. Mobile data traffic likewise improved by 73% from 249 petabytes (PB) in 2016 to 430 PB this year. Globe home broadband business likewise reported a robust 8% year-on-year growth, delivering a total of P11.7 billion revenues as of end-September this year. An interesting note is that Globe is a big proponent of fixed wireless for home broadband service.


The international strategy has largely been successful. This year, the regional associates in whom Singtel is a major shareholder deliver 48% of the Group’s overall profits.  Its Optus subsidiary in Australia accounted for 22% of Singtel profits. Meanwhile, operations in its home city of Singapore yielded just 30% of profits. The good news is that consumers across Asia are upgrading to smartphones and signing up for 4G data plans. In the first nine months of 2017, the number of data subscribers surged past 220 million – a 12% increase from the previous year. Mobile banking is another clear opportunity.  In India, Airtel received a bank licence from the Reserve Bank of India and in January it launched Airtel Payments Bank to offer banking services across the country, with 250,000 Airtel retail outlets. The same is happening in the Philippines.

An Overview of Singtel’s domestic operations

The SingTel Group long held the title of being the most valuable company in southeast Asia by market capitalisation. This crown was lost in late November when DBS Group Holdings Ltd., which is Singapore’s largest bank, shot past SingTel on an upward stock price trajectory. Bragging rights aside, SingTel presently has a market cap of US$61.5 billion, which is roughly 12 times greater than that of its nearest rival, Starhub, which is currently worth about US$5 billion.

Though it is now organised as a publicly-traded company in a market open to competition much of its incumbency status in the city-state of Singapore remains. It’s top ten shareholders are revealing:



Notably, the majority share of 51% belongs to Singapore’s sovereign wealth fund. This same fund also owns a 56% share in Starhub – of course raising questions about whether competition is free flowing or managed. Would Temasek really encourage or even allow a serious price war to break out in telecom services in Singapore if it were to damage one of its key investments?

Next on the list of Singtel investors are “old money” – the established banks that guide the export economy of this Asian tiger. This suggests a conservative board that’s more likely to favor safe and predictable dividends over fast growth opportunities. The company has consistently delivered on these expectations and senior management is right in line. Singtel has headed by Ms. Chua Sock Koong (59) as Group CEO since 2007.  She joined Singtel in June 1989 as Treasurer before becoming Chief Financial Officer in April 1999. Her background is as a distinguished accountant. Bill Chang (50) serves as CEO of the enterprise and ICT division.


A brief timeline

·         Singtel enjoyed monopoly status until 1998 but rival Starhub really got going in the early 2000s.
·        In 2001, Singtel completed its acquisition of Optus Australia. Also in this year, Singtel was awarded its first 3G license.
·         In 2012, Singtel acquired Amobee, a mobile advertising technology company, for $321 million
·         In late 2012, Singtel activated its LTE network.

A networking showcase, especially for mobile

In Singapore, Singtel currently holds approximately 82% of the fixed-line market, 49% of the mobile market and 43% of the broadband market. Fixed line connections continue to evaporate here, as they do everywhere else in the world, but mobile and broadband churn are very low.

In its local mobile market, Singtel currently serves some 4.1 million subscribers, capturing 49% of the mobile phone market. As seen in the official market statistics covered in part 1 of this article, mobile Singtel network footprint is practically ubiquitous within the city-state. There is no place you can go where there is not LTE and/or any of Singtel’s 1,000+ Wi-Fi hotspots available. Of course, this level of penetration is easier to achieve when there is only 278 square kilometers to cover in the whole country. The geography and the population density make Singapore an ideal place to showcase the latest mobile technologies.  Already, Singtel’s 4.5G LTE delivers mobile data speeds at 500Mbps nationwide.

One example is Singtel’s interest in Licensed Assisted Access (LAA) technology. In a joint trial conducted recently with Ericsson, Singtel witnessed 1.1 Gbps of performance. The test leveraged 256 QAM and 4x4 MIMO, and aggregated two licensed and three unlicensed spectrum bands on a TM500 Test System device. Singtel and Ericsson are also working on 4.5G LTE and 5G in Singapore. Earlier this year, high download speeds of up to 800Mbps were achieved on Singtel’s LTE network by deploying 256 QAM downlink, 4x4 MIMO and triple carrier aggregation techniques. In October 2017, Ericsson and Singtel established a 5G Centre of Excellence to facilitate 5G development in Singapore.

In August, Singtel confirmed that it is working with ZTE to complete the live deployment of the 2.6 GHz Pre5G massive MIMO network at one Marina Bay site in Singapore to enhance Singtel's 4G service.  ZTE noted that its Pre5G massive MIMO is suitable for high-density scenarios and will be deployed to help guarantee service quality during the high data traffic volumes that will result from the crowd gathered at the location during Singapore National Day. The higher speeds will help to address the surge in mobile data traffic seen by Singtel.

Average data usage per post-paid subscriber
March 2015 – 1.9GB
March 2016 – 2.4GB
March 2017 – 3.5GB

See also