The African Digital Network (ADN), a consortium of Kenya’s three leading media houses — Nation Media Group, Royal Media Services and the Standard Group — is planning to team up with a telecoms company to offer Internet services through set-top-boxes.

Sources familiar with the matter told The EastAfrican that the consortium is in early stages of discussions with Safaricom and Airtel. If a deal is signed, it would mark the first time a broadcaster and a telecoms company co-operate to modernise TV viewing in the country.

A senior manager at Airtel who requested anonymity said they are keen on such a partnership as it would enable Kenyan homes to receive quality, uninterrupted digital entertainment. But the source added that they cannot provide such services until the regulator allocates them the necessary spectrum for the rollout of a 4G network.

On his part, Bob Collymore, the chief executive of Safaricom, said his company was open to conversations with potential partners who would like to take advantage of the former’s wide footprint in the data field to provide services to consumers.

“The convergence of TV and Internet offers exciting new opportunities,” said Mr Collymore.

READ: Media consortium to offer Internet and TV package as country goes digital

Safaricom’s fibre optic network covers over 1,500km, with an additional 1,650km being laid in key metropolitan areas. The company is hoping to roll out the 4G network by March. A source at Orange Kenya said the company was also keen on entering into a partnership with key content providers.

“There is a strong mutual interest between broadcasters and telecoms,” the source said.

According to Michael Mugasa, an entertainment and media researcher at PricewaterhouseCoopers (PwC) in Nairobi, the switch to digital broadcasting and roll-out of 4G Internet services is “fundamentally re-organising Kenya’s TV market.”

Digital broadcasting has set off a rush to enter the industry as new players jockey for a sizable market share ahead of the March 31 deadline for the analog switch-off.

The battle is for who will dominate TV viewership in Kenya and grab the biggest slice of the $560 million advertising pie, which is projected to grow to $754 million by 2017. Established media houses have been forced to diversify their content and cut prices as competition from new entrants such as BambaTV, StarTimes and AzamTV heats up.

For decades, terrestrial broadcasting has been the dominant force in delivering video content. But this dominance is now being challenged by technological changes that are altering TV viewing habits.

For example, there is a shift to online viewing as more people opt to stream content rather than watch scheduled TV programmes. Others are moving to pay-TV because they want diversified content.

“Generation Y hardly watches TV, so now we have adverts moving online to target them because they prefer to access their programming on-demand,” Mr Mugasa told The EastAfrican. This shift online is eating into advertising dollars that have supported traditional TV for decades.

In 2008, Internet advertising revenue was a paltry $2 million. By 2017, Internet advertising in Kenya will grow to $64 million up from $59 million currently, according to forecasts by PwC.

The future of Pay-TV on the other hand is projected to be bright, with subscriptions expected to more than double in the next five years.

Kenya boasts two pay-TV digital terrestrial television (DTT) platforms, a cable network and four satellite TV operators. By 2017, total subscriptions are expected to rise to more than half a million, generating $111 million in revenue, according to reports.

But Simon Murray, a principal analyst at Digital TV Research is worried that Kenya’s pay-TV market could be showing signs of overheating.

“The number of players in the industry are too many for a country of only 2.87 million TV households,” he said.

However, Zuku, the only cable service in the country, is optimistic about the future of the pay-TV market.

“We are, however, deliberately playing our cards close to our chest,” said Richard Alden, the CEO of Wananchi Group, the parent company of Zuku.

Latest data from the Communications Authority of Kenya (CA) show that the cable company has a 44.5 per cent share of the wireless and fixed broadband market.

“Consumers are appreciating the model that through one connection they can access and enjoy an integrated solution of broadband and telephony,” said Mr Alden. “In fact, the numbers in the past one year have grown significantly and we are now ahead of our projections.”

ADN also intends to offer programming and broadband services from a local ISP using its free-to-air 4G-enabled set-top-boxes. Last week, ADN imported more than 150,000 set-topboxes to set up its digital infrastructure. A million more are expected in coming weeks, and how the market responds will give a picture of how competition in Kenya’s emerging TV market is shaping up. 

Currently, out of 1.5 million TV sets in Nairobi, more than 900,000 have been connected to the digital signal, according to CA.

By Trevor Analo and Scola Kamau