Kenya’s telecom sector is shaping up for a major transformation that is likely to lessen the dominance of the major player, Safaricom.
Competitive pricing of products and services, offers and promotions and a dramatic shift in the target market in favour of the youthful populace by rival firms is slowly putting Safaricom, the largest mobile phone operator in East and Central Africa, under pressure.
Latest data from the Communications Authority of Kenya (CA) shows that the telco has lost about 17 percentage points of its market share over the past decade — dropping to 67 per cent as at March this year, from 84 per cent in March 2008.
However, Safaricom, which is 35 per cent owned by South Africa’s Vodacom, still retains its dominant position with about 29 million subscribers.
“Clearly, the competition has become more effective. The over 80 per cent market share was the peak and was never sustainable,” Aly-Khan Satchu, chief executive of investment advisory firm Rich Management told The EastAfrican.
“This trend spikes the entire dominance debate that seems to pop up every so often.”
In the mobile data/Internet business, Safaricom’s market share declined to 68.4 per cent from 72.8 per cent, while Airtel gained 4.6 percentage points to 23.1 per cent.
Telkom Kenya‘s market share dropped to 7.6 per cent from 7.8 per cent while that of Finserve Africa Ltd , which operates the Equitel network, fell by 0.1 percentage points to stand at 0.5 per cent from 0.6 per cent .
Safaricom’s management had not commented on the firm’s dwindling market share by the time of going to the press.
Telkom Kenya on the other hand has rebranded and renewed its bid to win the youth market with affordable data bundles.
The firm has also adopted a campaign dubbed “Every bob counts” that aims to ensure that its customers get value for their money.
“We have always been clear that we want to become the challenger in the market,” said Aldo Mareuse, the chief executive of Telkom Kenya, which is jointly owned by the British Private equity fund Helios (60 per cent) and the government of Kenya (40 per cent).
“Telkom continues to invest in its network both for expansion and better accessibility but also with regard to quality of service, which has seen us invest close to Ksh8 billion ($80 million) towards our network modernisation programme over the past two years,” said Mr Mareuse.
Bharti Airtel’s Kenyan unit is also implementing a five-year plan that seeks to provide free Internet to schools.
The programme, which started in 2015 with an annual investment of Ksh30 million ($0.3 million) seeks to lure the younger generation to the firm’s data platform.
It is argued that the share of Kenya’s youth in the total population is among the highest in the world, presenting a huge opportunity for firms seeking to expand their customer bases.
The ratio of Kenya’s youth (aged 15-24) to the population stands at around 20.3 per cent, above the world’s average of 15.8 per cent and 19.2 per cent for Africa.
This ratio ties with that of Sudan but trails Uganda’s 20.5 per cent youthful population.
Nigeria, the most populous country in Africa, has a youth share of 19 per cent, South Africa 18 per cent and Egypt 16 per cent.
The data/Internet market in Kenya has grown remarkably over the years, buoyed by the arrival of the Smartphones. The total data/Internet subscriptions grew by 8.2 per cent to 36.1 million users between January and March this year from 33.3 million between October and December 2017.
Rivals including Airtel Kenya and Telkom Kenya have over the years questioned Safaricom’s dominant position, saying it is tilting the playfield in the telco’s favour.
The regulator says the country’s mobile market continues to undergo significant changes in the wake of rapid development in the telecommunication industry.
Between January and March this year Safaricom, which is listed on the Nairobi Securities Exchange, lost 2.1 percentage points of its market share to rival firms 67 per cent in mobile subscriptions compared with 69.1 per cent the previous quarter.
However Airtel gained 2.5 percentage points to record a market share of 19.7 per cent while Telkom Kenya lost by 0.4 percentage points to register a market share of 8.6 per cent from nine per cent.
Similarly, Finserve Africa Ltd lost by 0.1 percentage points to post a market share of 4.4 per cent.
According to CA, the continued expansion of GSM networks, roll out of LTE technologies both on commercial and trial basis, development of new products and enhancement of existing products by various service providers has boosted the uptake of various mobile services.
Mobile voice and mobile data traffic is also growing remarkably due to special offers and promotions by the service providers.
The Kenyan data/Internet market has been characterised by the entry of new players, especially in the roll out of 4G mobile technologies, which offer more reliable and faster mobile Internet speeds.
It is expected that this will enhance competition in the data market in the coming quarters as service providers offer more friendly bundles at lower prices.
Competition in the mobile money transfer segment is also expected to increase following the launch of the T-Kash Money by Telkom Kenya.
Despite the drop in market share, Safaricom’s mobile money service Mpesa remains Kenya’s favourite means of sending money, with 80 per cent of the 664 billion mobile money transfer transactions valued at Ksh1.8 trillion ($18 billion), conducted in the first three months of this year.
During the period, money transfer transactions on the Mpesa platform stood at 531 million valued at Ksh1.48 trillion ($14.8 billion).
Equitel Money, associated with regional lender Equity Bank conducted 128 million transactions valued at Ksh389 billion ($3.89billion), compared with Airtel Money’s 3.4 million transactions valued at Ksh1.88 billion ($18.8 million).
Telkom Kenya’s T-Cash transactions stood at 2,226 valued at Ksh8.14 million ($81,400).
MPesa was launched in 2007 as the world’s pioneer mobile money transfer service and has enjoyed relative success, expanding to more than 10 countries across the world.
However it is feared that the recent implementation of a cross-network mobile money transfer service could reduce its dominance in the Kenyan market.
The mobile money interoperability system which was implemented in April this year allows mobile money users to send money between the country’s largest mobile networks, Safaricom and Airtel.