Major African Mobile Markets: Future Growth Prospects 2006-2011  

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Back Industry Overview Mobile Market Future Outlook Figure 1:Kenya - Mobile Subscribers and Penetration (2002-2011) Figure 2: Kenya - Market Share of Mobile Network Operators (March 2005) Figure 3: Safaricom - Ownership Structure Table 1: Kenya - Important Economic Parameters (2004) Table 2: Kenya - Telecom Industry Snapshot Table 3: Mobile Subscribers (2002-2011, In Million) Table 4: Safaricom - Key Performance Indicators (FY end-March 2005) The Republic of Kenya is a developing economy, which is primarily dependent on agriculture and related industries. Agriculture constituted approximately 18 percent of the country's GDP in 2004. Kenya possesses much scope for economic growth and the economy's recovery in recent years has been achieved due to measures such as incentives for farm production and development of small scale primary industries. In the early 1990s, Kenya's economy suffered greatly due to inefficient management of agricultural and international trade policies. However, in 1993 the economy began to revive as it benefited from policies of economic liberalisation, privatisation and the support of international organisations such as the IMF and World Bank. However, the economy's growth stagnated once again in 1997. The overdependence of Kenya's economy on agriculture with low-priced goods and the severe drought in the country in 1999, which deeply affected agriculture production, have been some of the major reasons for the lack of modernisation in the country. Corruption, which is widespread in Kenya, especially in the judicial system, is another major problem. Other issues of concern for the country are an unstable political environment and the widespread problem of HIV/AIDS. Kenya possesses much scope for economic growth and the economy's recovery since 2002 has been achieved through measures such as incentives for farm production and the development of small-scale primary industries. The growth of telecoms in Kenya has been slow until recently, mainly due to strict government regulations. The market has been partially liberalised only recently and has since been growing at a faster pace. Table 1 provides an overview of the country's key economic parameters. Table 1: Kenya - Important Economic Parameters (2004) Telecom Industry Overview Kenya's telecom market has great potential for growth because of the low penetration levels in both fixed and mobile markets The year 2004 was marked by significant changes in the country's telecom industry, with the incumbent operator Telkom Kenya losing its monopoly in the fixed-line and internationals bandwidth sectors. Moreover, in 2004 licences were issued to a regional carrier, third mobile operator and several new data carriers, thereby marking a significant change in the competitive landscape for telecom services across the country. Some of the anticipated events that would further alter the market and drive the growth of the sector in the future are the proposed privatisation of Telkom Kenya in 2006, licensing of a second national operator and the launch of mobile services by a new operator. The official telecom regulatory body of the country is Communications Commission of Kenya (CCK). Table 2 provides an overview of the country's telecom sector in terms of subscriber numbers and penetration rates. Table 2: Kenya - Telecom Industry Snapshot Mobile Market Mobile services in Kenya were pioneered with the launch of an ETACS network in 1993. But due to issues such as the high cost of handsets and high charges for the service, the number of mobile subscribers at the end of 1999 was only 20,000. However, after the launch of GSM services in 1999 by Safaricom, the mobile market has been growing consistently. At present there are two mobile network operators in the country, who provide services based on GSM network. A third player (Econet Wireless Kenya (EWK)) has been granted a licence to provide GSM-based mobile services in the country. In 2004, Safaricom launched 2.5G (GPRS-based) mobile services. The networks of the two operators currently providing mobile services in Kenya cover all major towns and highways in the country. However, the growth in their mobile network coverage has been accompanied by certain quality issues, which have been closely monitored by the regulatory commission. Market Size The total number of mobile subscribers in Kenya at the end of June 2005 was 4.61 million, resulting in a penetration rate of approximately 13.8 percent. Total mobile subscribers in the country have increased at a rapid rate of approximately 75 percent from 1.95 million at the end of 2003 to 3.42 million at the end of 2004. The corresponding increase in the penetration rate during this period has been from 6.1 percent to 10.4 percent. The country's mobile subscriber base is expected to increase at a CAGR of approximately 27.6 percent during 2005-2011, resulting in a mobile subscriber base of 25.45 million and a penetration rate of 64.8 percent by the end of 2011. Table 3 shows the forecasts for mobile subscribers in Kenya for the 10-year period from 2002 to 2011. Table 3: Mobile Subscribers (2002-2011, In Million) Figure 1 illustrates the trends and forecasts for mobile subscribers and the penetration rate in Kenya for the 10-year period from 2002 to 2011. Figure1: Kenya Mobile Subscribers and Penetration (2002-2011) Mobile Network Operators Kenya's mobile market has two key players - Zain and Safaricom. Safaricom emerged as the stronger of the two in March 2005, holding about 65.9 percent of the market share. Figure 2, below, illustrates the market share of the operators, measured in terms of subscriber numbers, as at 31st March 2005. Figure 2: Kenya - Market Share of Mobile Network Operators (March 2005) Source: Company Reports Safaricom Safaricom was the first operator to launch GSM-based mobile service in Kenya in 1999. It recently launched 2.5G (GPRS) service in the country and provides value-added services, such as SMS, MMS, e-mail, etc. The majority of its shares are owned by the country's incumbent telecom operator, Telkom Kenya. Vodafone Group also has a substantial stake in the company. Figure 3 shows the latest ownership structure of the company. Figure 3: Safaricom - Ownership Structure Source: Company Reports Table 4 provides an overview of the operator's key performance indicators. Table 4: Safaricom - Key Performance Indicators (FY end-March 2005) The second operator in Kenya's mobile market is Zain, which acquired a majority stake in KenCell in May 2004 and now provides GSM-based mobile services across the country. KenCell Communications was previously owned by Vivendi Telecom International. Zain had 2.51 million mobile subscribers as on 31st March 2005. The operator also provides value-added services, such as SMS. is a wholly-owned subsidiary of MTC. Recent Developments Some of the recent developments in Kenya's mobile market are as follows: Mergers and Acquisitions In 2005, MTC completed the acquisition of , with operations in 13 African countries, for USD 3.4 billion. According to the agreement, MTC obtained 85 percent stake in Zain and would be acquiring the remaining 15 percent over the next two years. Zain would continue to operate as a separate entity from MTC. Technology Innovations and New Services In 2005, Safaricom signed a deal with CellTracker for obtaining help in the management of its network expansion projects in Kenya. The management tool, which Safaricom has obtained as a result of the deal, should assist it in various aspects of network expansion, such as site acquisition, civil works, etc. Regulatory Developments In November 2004, Kenya granted a third GSM licence to Econet Wireless Kenya (EWK) to launch and operate a mobile network in Kenya. This is expected to further increase the price competition, making it accessible to a larger population and thus driving growth in the sector. Top of page Future Outlook Kenya's mobile market experienced rapid growth throughout 2002 to 2004 at an annual average rate of more than 55 percent. Kenya's mobile market grew significantly after the introduction of competition into the market in the form of a second GSM operator. Prior to that, mobile penetration was lower due to the high prices of handsets as well as high mobile usage charges. The decrease in prices, following the launch of services by the second operator, fuelled growth in subscriber numbers. However, there is still ample growth potential in the market due to the present low levels of penetration. The total mobile subscriber base is expected to grow at a CAGR of 27.6 percent during 2005-2011 to approximately 25.45 million subscribers at the end of 2011. Some of the factors likely to drive this growth include: Launch of services by a third operator A third GSM licence has been awarded to EWK. The launch of services will increase competition in the Kenyan mobile market, which at present is a duopoly. Low level of mobile penetration Mobile penetration in Kenya at the end of June 2005 was approximately 13.8 percent. The low level of penetration coupled with affordable mobile services available due to competition between operators, should further drive growth of the sector. Due to the low level of mobile penetration, it is expected that subscriber growth in Kenya should remain healthy for the next few years Regulator policies ­ The Communications Commission of Kenya (CCK) has frequently asked the two mobile operators to reduce inter-connectivity charges. The charges of the two operators are very high in spite of a recent reduction, which according to CCK was marginal. Improving price competition is expected to positively influence overall market growth. ­ Though there has been a rapid expansion of network coverage in Kenya, there have been issues with the quality of service. In order to tackle this problem, the commission intends to use modern quality monitoring devices for maintaining the quality of service. This measure is likely to positively influence market growth. Top of page Copyright © 1998-2009 Africa & Middle East Telecom Week