Cheating in Kenyan national exams goes high tech

The Kenya Certificate of Secondary Education (KCSE) examinations kicked off nationally last week. Like in the past few years, the public was treated to media reports of examinations cheating by candidates and their proxies, despite feeble attempts by the Kenya National Examinations Council (KNEC), the government body in charge of these matriculation exams.

The truth came out last week, with arrests of teachers allegedly with access to the exams, to cartels transmitting and selling the exams and to students who had proxies sitting the examinations on their behalf.  In one of these cases, an individual arrested turned out to be an “informer” working for KNEC, and who over the past few years has been working undercover and busting some of these cartels.

But the bit that was interesting were reports that corrupt individuals with access to the examination papers, were actually using high tech devices in the cheating. The individuals with access actually scan the pages with blue tooth enabled portable scanners, send the scanned pages to their smart phones, and through an elaborate scheme send via blue tooth, MMS and even emails the scanned examination pages to their agents, then pass on the same to the students who need who purchase them for ‘preview’ for between USD 5o and USD 100. This in a third world country, where 60% of its population lives below the poverty line!  According to the media, the government is now working closely with the mobile phone providers to track down the crooks messing up its education system and values.

That’s how competitive and cut throat the education system is in Kenya>

Power outage, now Internet outage!

Last week, in typical Kenyan style, we had a nationwide power outage that lasted from 2-7 hours depending on which part of the country. reportedly the government machinery went into a spin as it developed into a security issue. The cause was apparently a malfunction in the monopolized power utility firm, Kenya Power & Lighting Co. Ltd due to the large amount of diesel powered generators that we are using as a stop gap measure to avoid us being in perpetual darkness.

This was shortly followed by Safaricom’s cellular and Internet outage on Friday last week, due to 4 or 5 cuts on their main fibre optic ring network, either due to other Internet firms laying their fibre optic, and what was attributed to as sabotage at 2 of those points.

This was followed by Seacom’s claims that its main fibre optic line at Voi was sabotaged, resulting in downtime for its subscribers in the Coast area and Nairobi.

Now its sabotage of the country’s communication infrastructure due to the competitors’ hunger for domination of the market. This is extremely worrying and should be treated by the government as a threat to its nation security.

Is the national fibre optic project paying off in Kenya?

It appears that the national fibre optic national project might be paying off if statistics for the April-June 2009 from CCK are anything to go by. As at end of June 2009, the number of Internet subscribers in Kenya grew to 1.82 million, from 1.52 million as at end of March 2009. This is a 20 per cent growth rate in the Internet subscriber base!

Looking closely at the data collected by CCK, most of these growth is attributed to mobile data/Internet subscribers, due to the aggressive roll out of data services by the major mobile operators.

This can be explained by the table where I have extracted what is interesting.

Indicator	Dec-08	March-09	June-09
Number of leased line customers	1,809	2,002	2,789
Number of dial up customers	7,846	6,902	7,231
Number of mobile data/Internet subscribers	392,964	1,674,948	1,801,876
Number of Internet subscribers	407,845	1,713,852	1,824,203

 Source: CCK Database

This perhaps explain results of an earlier study undertaken early this year to investigate factors that determine Internet utilization among teachers and their students in selected schools that had Internet connectivity in Kenya.

The study showed the extent to which the Internet is utilized and identified the factors that enhanced or impeded its utilization at this level of education, and which can be used to explain the integration of Internet into the teaching and learning.

The findings of the study shows use of Internet and its integration in the teaching and learning in secondary education is getting more widespread; and its use more pervasive among students and teachers as a means of communication and for information searching being common; and the least use in some instances for course content delivery, assignments and continuous assessments.

Access rates for teachers and students were observed to be much higher in educational institutions that have made effective ICT investments in education.

The study also found that most of the schools are actually expending a substantial part of their annual budget on maintaining Internet connectivity, and this explains why it is estimated by the Ministry of Education that only 3% of the 6,566 secondary schools in Kenya have any form of Internet connectivity. But this could change with the enhancement of the competition regulatory framework as well as operationalization of the National Fibre Optic cable to boost Internet penetration and bring the cost of Internet connectivity down in the third quarter of 2009 (a very far fetched idea now that data operators are not changing their pricing of data bundles till they recoup their initial investments).

There was a positive correlation between proportions of students and teachers accessing the schools’ computers, and this was evident in girls only schools where it appeared that investments in ICT was low and resulting in gender disparity disadvantaging the girl child. This does not portend good news for the girls in the secondary schools, considering that there are 635,698 girls enrolled, constituting 46% of the country’s 1,382,211 total student enrolment in secondary schools. Though the study focussed on schools with Internet connectivity, the proportion of teachers with access to computers and internet at schools and homes was respectively 98% and 53% of the teachers sampled, implying that the affordable bundle rates and increased access to the mobile wireless broadband services is having an impact. According to the Communications Commission of Kenya (CCK) there were 392,964 mobile broadband users as at 31 December 2008 . Some of the schools sampled were addressing the issue of accessibility to computers by its teachers and students through use of Wi-Fi in the school localities. This is also reflected at the proportion of teachers and students with email addresses which are at 92% and 64% respectively, with 72% of the students owning mobile phones.

Zain to roll out 3G in mid-2010

Zain looks determined to venture into the 3G technological platform in an industry long held by Safaricom. Should Zain afford to pay the Kes. 2 billion (USD 25 million) for the licensing cost of the spectrum to CCK, it will become the second mobile phone operator in Kenya to roll out 3G.

The cost of setting up of 3G network infrastructure has been prohibitive for new entrants into the Kenyan market, with current statistics from CCK’s April-June 2009 report indicating that as at 30 June 2009 there were 17.4 million mobile subscribers. With this sort of growth being witnessed in the country, it is quite disappointing to note that even despite registering a growth in Internet users subscriber base, from 1.52 million in March 2009 to 1.82 million in June 2009, we are still a long way from achieving affordable Internet access as the fibre optic national infrastructure nears completion.

Most of this growth in Internet subscribers can be attributed to the new purchases of Safaricom’s broadband modem that run on 3G network. This accounted for nearly 60% of the growth, with Internet access via leased lines contributing 39% in the same period. Only one of the major data operators has dropped the price of the international bandwidth, and even offering 4 megabytes of bandwidth at the current price it is charging 1 megabyte. The other operators, in the true Kenyan capitalist spirit said they require at least 2 years to recoup the billions sank into the project.

But in my opinion, Zain (Celtel or whatever) has been always extremely slow in responding to the market trends, and mid next 2010 will be too late for them, as Safaricom keeps on getting “better”.

Seacom fibre optic landing heralds in new era of Internet connectivity

There has been a lot of excitement since last week over the Seacom fibre optic cable that went live this past Saturday at the Swahili Cultural Centre, Mombasa.

The undersea cable was commissioned simultaneously in Kenya, Tanzania, Mozambique, South Africa in Africa; and in India. Though from initial reports from the sponsors it is still a little bit premature to celebrate as the effects of fibre optic connectivity will not be felt till September (6 months late due to piracy activities off the coast of Somalia where the cable had to pass by).

There has been an expectation among end users that this will result in immediate downward trend of Internet costs, but I do not think this is likely to happen sooner as the investors need to recoup some of their initial investments. From media reports, Seacom will offer wholesale prices at around Ksh. 7,700 (USD $ 100)/mb, and at very subsidized prices of Ksh. 770 (USD $ 10)-1,925 (USD $ 25)/mb to educational, research and health institutions. Bandwidth currently cost Ksh. 42,350 (USD $ 5,000)/mb. The subsidized rates are of tremendous interest to stakeholders in the education sector, especially when we consider that it is estimated that about 3% of the 6,566 secondary schools (as at 31 December 2009) are connected to the Internet. Recent research indicates that a majority of these schools rely on tuition fees to sustain these connectivity, and spend up to 5% of their annual expenditure for such. Therefore, such subsidized costs will be a welcome relief to such schools, not only at the secondary level but also the primary schools. This calls for concerted efforts from the government and other stakeholders that concurrent efforts are undertaken to ensure wider penetration of Internet through provision of adequate power supply so as to provide ICT access to all schools, especially in rural areas so as to reduce the “rural urban digital divide”  among other measures.

Already there have some noticeable difference in access speeds, and personally have noted that most domains on .ke (whether .ac, .co or .or) load much faster than previously experienced. Even NTV, incidentally the same agency as AKF which is the a major shareholder in Seacom, has moved to upped its digital media service by offering TV content online through streaming video or downloadable by partnering with Safaricom.

But this is bound to come with its own challenges, one of which has been argued by some players that the bandwidth is just too huge to be consumed and will result to redundancies. Consider this fact:- it is estimated that an average user in Kenya utilizes about a gigabyte of data/month, and Seacom will provide 160 gigabytes/second! The other issue has always been availability of locally relevant content, though there seems to be a lot of effort out there to rectify this anomaly by encouraging use and creation of local content by the KICTB and even Google Kenya. With high Internet speeds, we are also likely to attract the attention of hackers who have never bothered looking at this side of the world due to the trivial data transfer speeds in existence.

Let’s wait and see what happens in the next few weeks, as there is no information on what exactly happened of the government led EASSY fibre optic project.

For youngest mobile phone firm, the war has just begun

Source: http://www.eastandard.net/InsidePage.php?id=1144013286&catid=457&a=1

ix months after its entry into the local market, Yu, Kenya’s youngest mobile phone services company, feels it has grown enough muscles to take on its older rivals in the business.

In a span of about two months, the holding company has changed its name from Econet Wireless Kenya to Essar Communications and the seams seem to be busting with a number of sweetheart offers, tailored to woo new customers.

About a fortnight ago, the company launched free Short Message Service (SMS) for intra network messages. The free SMS model is a first in Kenya and could significantly drive up the uptake of its services.

"At Sh7.50 for cross network calls and fifty cents for intra-network charges, we are offering the cheapest calling rates in the country. Our idea is to offer services at the cheapest rates and grow our market share," says Yu's MD Srinivasa Iyengar.

It could be a tall order for the company given the general slowdown of the economy. Companies seeking to expand have been experiencing setbacks in sales projections as job cuts, and inflation, eat into consumer purses, slowing down new spending.

Entering the country’s mobile telephone market is a capital-intensive venture, given the nature of the market, customer loyalties and a myriad other factors. It also involves fighting vicious publicity wars against established market players, which also entails massive expenditures.

But, Iyengar, is confident that Yu will pull it off because the company’s current business model has been working well in India, where mobile companies charge minimal rates for services then rely on the mass market to drive up their profits.

The Indian way

Last year, Econet Wireless International sold a 49 per cent stake in the company to India’s Essar Communications Holdings in a move that was expected to significantly benefit the company, which is 70 per cent owned by EWI, in its a rollout and enhance its products.

So far, the company seems to be going the Indian way and the latest offer of free SMS could be geared to shepherd the mobile market in the direction of what is popularly referred to as bundle SMS offers in the Indian market.

Under the bundle regime, mobile users are given opportunity to determine and buy the number of SMS they would like to send in a bundle, say 40, 70 or more in a month and then pay heavily discounted prices for the services, depending on the chosen bundles.

Although he is not shy to admit that his company could be operating at a loss because of its chosen model of business, Iyengar is confident that it will pay off in the long run.

"The mobile market is growing and we hope to shore up our subscriber base to three million in the next two years. We are offering the best services. This is not something to advertise because the information is out there. It is time for people to begin asking the hard questions, especially about mobile charges and subscribe to the best offers," says Iyengar.

In the latest sector statistics report, the market regulator, Communication Commissions of Kenya (CCK) says that with the addition of new players like Yu, competition is expected to intensify leading to a range of benefits such as reduction in cost and choice for consumers, which will ultimately increase mobile penetration in the country.

So far Safaricom is the market leader with a market share estimated at about 80 per cent, followed by Zain. The latest entrants into the mobile market, Orange and Yu have also been gaining slices and are expected to grow with the market.

new subscribers

But Iyengar says some mobile companies are charging too high for services and feels this is immoral, especially in a country where people are still struggling to buy bread.

"It makes such companies look bad. In fact you can see the anxiety in people’s faces whenever they are making calls. They have to hurry and talk fast to save on costs, which I think is also destroying interpersonal relationships. We have to find a way of lowering call costs to remedy the situation," says Iyengar.

Recent entrants to the mobile market like Yu have been for the adoption of mobile number portability, which has traditionally benefited new entrants into markets.

But established market players have not been receptive of the idea that allows subscribers to migrate to new operators with their old numbers.

To circumvent the bottlenecks, Yu launched a similar service, which allows its customers to retain their old numbers while operating under the company’s prefixes.

Another new service in its stable, imoved allows new subscribers on the network to inform their contacts about their new mobile numbers free of charge.

Financing to redraw battle lines in mobile industry

Source: http://www.nation.co.ke/magazines/smartcompany/-/1226/594008/-/soc057z/-/index.html

The global financial crisis is set to change the face of competition in the mobile phone industry as players’ finances are squeezed and China moves in for the kill. At the continent level, a number of changes are expected as big mobile operators seek to consolidate their dominance as they cut back on spending.

“There could be a lot of change this year,” says Thomas Sonesson, the managing director of Ericsson East Africa, one of the largest network building companies globally. Locally, Ericsson controls about 51 per cent of the market with Zain, Orange and Yu networks operating on its infrastructure.

Credit squeeze

In Kenya, the financial crisis has slowed down competition with two of the four cellular companies said to be in dire need of funds — and lots of it — to make any meaningful impact in the market. Safaricom dominates the market, controlling about three quarters of mobile subscriptions and dwarfs all in profitability.

International lending is not forthcoming, not just for the cellular phone operators but for most corporates, given the credit squeeze in the global market that has forced lenders to tighten their purses. This trend is slowly catching on in Kenya’s banking industry with a marked slowdown in lending, especially in the last quarter of 2008.

Most banks have recorded reduced uptake of loans and this is set to tighten further as the effects of the global credit crunch begins to hit home. Globally, the credit squeeze has seen even governments postpone borrowing, with Ghana and Kenya delaying issuance of sovereign bonds worth more than $800 million (about Sh64 billion).

It is worse for corporates as the expected economic slowdown means reduced consumption of their products and services. Banks, ever more risk-averse, have read this as increased credit risk, and are reluctant to lend as they seek to balance growth and risk exposure.

And in all this confusion, the Chinese government has seen an opportunity to deepen its interests in Africa. “The Chinese government is giving financial backing to its corporates who in turn are offering to do network set-ups for mobile companies that are in short of funding,” says Mr Sonesson.

“For companies like ours that is not an option as we do not have similar backing. This will definitely change competition with Chinese companies becoming a preference.” Another factor determining financial backing for local operators is the internal competition within the company portfolios. With a squeeze in the amount of funds available, cellular phone operators have been forced to review their policies on allocating funds.

Licensing of G3

“Companies will migrate their capital to the country within the region with the best returns,” says Nicholas William, Ericsson regulatory affairs director for sub-Sahara Africa. “Kenya will need to improve its environment to make it more competitive if it is to attract investment.”

Ericsson managers say Kenya needs to cut down on taxes levied on mobile industry, ranging from excises duty on airtime, Value Added Tax, to duties on importation of machines and equipment. And to level competition in the current fluid environment, they suggest the government should rethink its policy on licensing of the more robust technology network: 3G.

Currently, it is only Safaricom that operates 3G, a superior network to the 2G that’s being used by the other three operators. The problem has been the $25 million fee (about Sh2 billion) for a 3G licence. Safaricom paid for it in 2007. Ericsson proposes that to ease the pain for the other three operators and level competition, the government should consider spreading $25 million over the lifetime of the licence.

“The amount should be ‘lend’ to the users at interest rate equal to a Treasury bond of similar tenure to the intended repayment period,” Mr Williams says. Electricity distribution should also be addressed. Lack of power especially in the rural areas has been the greatest challenge to mobile phone operators’ expansion.

The alternative has been to use generators to power substations, which takes up operation costs by 25 per cent. MTN Nigeria is said to the largest single buyer of oil in Nigeria to fuel its over 10,000 generator-backed base stations. “The country that will be ahead on that and will have a head start in attracting investment and also in addressing problem of rural connectivity,” says Mr Sonesson.

Electronic pick-pockets on the loose

Source: http://www.nation.co.ke/magazines/artandculture/-/1222/592352/-/83qljdz/-/index.html

Despite of all the good things brought about by the Internet technology, this sophisticated communication tool has developed a ‘long hand’, and is literally stealing billions of shillings from pockets and bank accounts of its users.

Studies shows that thousands of criminals, mostly from the western and southern parts of Africa, America and even Britain are using attractive and seductive email massages to lure innocent victims into divulging their personal bank account details without knowing that they are being conned.

The conmen sometimes send email messages to millions of addresses (but targeting account holders of particular banks) insinuating that a problem has been detected with their online account information, which needs to be rectified immediately.

The message therefore prompts users to log in their confidential banking details as a matter of agency. The global address or URL provided on the email comes with a well crafted logo and finer details to mimic that of the bank in question, thus deceiving the victims.

Account

In a different system, the fraudsters hack into their victims’ email accounts, and send a distress mail to all addresses found in the inbox seeking desperate help from innocent friends and relatives. They usually change the original password, thus denying the original user access to the email account.

Most common are mails indicating that the legitimate owner of the address is currently stranded in a foreign country. Such a message claims that all his or her money including personal effects and documents have been stolen. The message therefore requests the recipients to help out by sending money through any appropriate money transfer mechanism.

This means that if one falls a victim, then the money has to be sent to an alternative recipient’s name, since it is clear that the ‘intended’ recipient has allegedly lost the necessary documents needed to withdraw cash. In case the recipient replies by email, then the message is received by the con man, who later offers directives on how the money can be sent.

This kind of theft mostly targets hard cash ranging from Sh 100,000 to Sh 500,000. According to information technology experts, the hackers use software called Spyware, which is secretly installed on one’s computer sometimes using the internet, and copies information without the permission or knowledge of the user.

“Spyware may take personal information, business information, and bandwidth from the computer or processing capacity and secretly gives it to someone else,” said Samuel Scooby, a Nairobi based computer expert.

Through this, conmen can access the victim’s entire confidential information, thus keep track of all email correspondence allowing them to monitor movements of their target ‘customer’.

Sometimes when an air ticket is issued through the same mail, it gives the thugs a great opportunity to con the victim’s friends and relatives because they know exactly where their ‘customer’ is.

Legitimate

Another sophisticated method used in internet frauds is what experts refer to as Phishing. Through this, the criminals can target electronic banking identification information of legitimate online customers of a particular bank, then use the information to transfer monies from the victim’s account to a different one.

“The term ‘phishing’ refers to the use of spam emails purporting to be from a particular bank. In this way criminals ‘fish’ for legitimate bank customer’s logon information with an intention of transferring their savings to a different account,” said Scooby.

Spam is a generic term used to describe electronic ‘junk mail’ or unwanted messages sent to your email account or mobile phone. These messages vary, but are essentially commercial and often annoying in their sheer volume.

They may try to persuade you to buy a product or service, or visit a website where you can make purchases; or they may attempt to trick you into divulging your bank account or credit card details.

A study done by Nirph Digital Ltd, a US based banking security solution provider shows that in the year 2008 alone, 10 million individuals in the US were victims of internet fraud. As a result, $ 48 billion (Sh 3.8 trillion) reportedly found way to the fraudsters’ pockets by the end of the year.

Zain raises call tariff charges

The price war in the mobile phone market has forced Zain to review its tariff plan upwards.

Now, the cost of calling from Zain to other networks is Sh12 a minute, up from Sh8 under its prepaid ‘vuka’ tariff, which was designed to net new subscribers.

Unlike other instances when such downward revision of tariffs is widely publicised, the upward revision was silently launched with only media adverts to warn the users.

The new tariff took effect on Saturday and according to Zain Kenya Managing Director, there is no other hidden cost or call set up fee.

The cost of Zain to Zain calls remain at Sh8 a minute, with special offer of calling 10 numbers (friends and family) at Sh3 a minute.

Last year, Zain Kenya registered a loss, largely attributed to its low cross-network tariff campaign, Vuka.

The campaign pulled its average revenue per user (ARPU) to record lows and the lowest in Zain’s Group of 22 countries at $6 (Sh462) down from $7 (Sh539) in 2007.

This is despite the company’s growing market share and subscriber numbers.

Its net losses increased to Sh6.9 billion at current exchange rate of Sh77 from Sh1.67 billion in 2007 on lower revenues and increased administrative costs mainly due to costs related to network expansion.

Attract new subscribers

The company lowered its tariff in October in an effort to attract new subscribers, but the move hurt its revenues despite growing its customer numbers and probably the reason for the current upward review.

For the past few months, mobile operators have been engaged in a price war, which has significantly reduced the mobile tariffs.

Until Saturday, Zain Kenya’s Vuka tariff was the third cheapest at Sh8 a minute to all networks. Calling Orange mobile (Telkom Kenya’s brand), costs Sh7 a minute within the network and Sh10 across network.

Yu, the most recent entrant, charges Sh7.50 a minute to other networks, but one shilling within network.

Calling within the Safaricom network using the Ongea tariff (the most popular prepaid tariff) stands at Sh8 a minute, but Sh15 when calling other networks.

Mobile phone subscribers grew by 1.7 million to stand at more than 16.2 million in the quarter ending December last year, according to a report by the Communication Commission of Kenya. The battle for supremacy and subscribers is not only in the tariff platform, but also on Internet and smart phone technology. Zain-Kenya recently launched a new version of Black Berry smart phone, an upgrade of the phone in the market.

3G phone

The launch came just weeks after Orange introduced iPhone 3G, smart phone.

Safaricom, too, has its own version of Blackberry but has extended tentacles to the masses by introducing cheaper phones.

Its latest entry, Kabambe, has, however, received bitter criticism from users as it breaks down often.

"My Kabambe loses network and no longer has Mpesa and Safaricom functionalities. Worse, I give out my phone to Safaricom for eight days for repair," decried one of the ‘Kabambe’ users at a Safaricom Customer Care point in Nairobi.

Safaricom Internet Modem, Bambanet, now sells at Sh4,000 down from Sh6,000.

Source: http://www.eastandard.net/InsidePage.php?id=1144014459&catid=14&a=1

Survey shows Internet users rose despite economic downturn

Source: http://www.eastandard.net/InsidePage.php?id=1144014863&catid=14&a=1

The number of Internet users increased from 2.9 million in 2007 to 3.4 million last year, despite an economic slump, the Economic Survey 2009 reveals.

However, Internet penetration has been among the least accessible telecommunication service due to lack of infrastructure and relevant local content.

The much-anticipated undersea Fibre Optic cable (TEAMS) next month, and improved competition regulatory framework would boost Internet penetration.

"Introduction of broadband services by mobile operators is expected to further boost Internet penetration and use which has remained low in the past," reads the survey in part.

The Communication Commission of Kenya (CCK) issued 127 licenses to Internet service providers {ISPs} out of which 56 were operational compared to 50 in 2007.

Cell phone subscribers

According to the survey, the number of mobile phone subscribers stood at 12.9 million last year up from 9.3 million in 2007. This is against mobile telephone capacity of 25 million subscribers.

The broadcasting sector experienced increased demand for frequencies. CCK assigned a total of 30 new FM frequencies out of 295 applications for FM broadcasting.

The number of applicants awaiting allocation for TV frequencies increased from 143 in 2007 to 192 in 2008.

The year under review (2008) also saw the launch of the first digital mobile television broadcast network in the country.

The CCK assigned nine TV broadcast channels to Digital; Video Broadcasting-handheld (DVB-H) but a number of assigned frequencies were recalled due to non-utilisation.

This resulted to the total number of frequencies in operation dropping from 127 in 2007 to 81 in 2008.

Radio Frequencies in use dropped from 368 in 2007 to 268 last year.

Digital technology

"CCK continued to spearhead the preparatory process of the transition from analogue to digital TV broadcasting. It is anticipated that the transition would help in reducing the number of applicants and those on waiting list due to spectral efficiency of digital technology," reads the report.

Kenya has set 2012 as the year of transition ahead of the 2015 global deadline.

"In order to improve access to ICT services, the CCK implemented 16 school-based ICT centres spread across the eight provinces and funded establishment of four ICT community access points," reveals the survey.

Circulation of daily newspapers rose to 99.3 million copies last year up from 98.4million copies in 2007 which is a 4.6 per cent increase.

Funding hitches hit digital villages project Account Flossy tales of ICT in Kenya

Source: http://www.nation.co.ke/business/news/-/1006/600218/-/ijmrtyz/-/index.html

Plans to decentralise information and communication technology services to villages is behind schedule due to funding hitches by the main financier, the World Bank.

Stringent conditions and high interest rates have barred the government from accessing the funds according to Information and Communication permanent secretary Bitange Ndemo.

The World Bank had approved $114.4 million loan to facilitate connectivity for Kenya’s emerging business process outsourcing industry, support the creation of digital villages in rural and urban areas and upgrade the regulatory environment.

Speaking at a Nairobi hotel on Tuesday during a media briefing organised by Kenya Data Networks, the PS said that the government has been forced to resort to Treasury and other private investors to finance the digital villages projects after it became difficult to access the World Bank funds.

As a private initiative, the Kenya Data Networks is at the moment spearheading the setting up of the digital centres. KDN chief executive Kai Wulff says they have set-up eight centres against a target of more than 100 and blames lack of funds for being unable to complete the project.

Safaricom profit down 23 p.c.

Source: http://www.nation.co.ke/business/news/-/1006/601622/-/ijm0d9z/-/index.html

Kenya mobile phone service provider, Safaricom, registered a 23 per cent fall in profitability, showing vulnerability to low tariff pricing and high cost of goods.

And for shareholders, a Sh4 billion dividend payout failed to translate to good news, as the large number of shares (40 billion) mean they will each get 10 cents per share. That means that shareholders who were allocated the minimum 420 shares will receive Sh42 only.

In the year ending March 31, 2009, Safaricom’s pre-tax profit shrank Sh5 billion to settle at Sh15 billion down from about Sh20 billion recorded in 2008.

The profit decline was however not too heavy to dislodge Safaricom’s regional ranking as the most profitable (listed) company in the East Africa.

“These results were delivered despite the difficult economic conditions encountered during the year,” Safaricom’s chief executive, Michael Joseph said Thursday, during announcement of the firm’s financial results.

While the company managed to drive up its revenue by 15 per cent, management says irrational tariff pricing by its competition — which saw some operators cut their tariffs to one shilling per minute — negatively impacted on its bottom line.

Competition

To keep up with its competition, Safaricom readjusted its pricing by about 70 per cent to Sh3 per minute under the Jibambie promotion.

Before reviewing its tariffs, Safaricom was charging Sh10 per minute for within network calls and Sh15 per minute for across network calls.

“Irrational pricing made it very challenging for us, but not as much as it did to our competition. Overall, however, the biggest impact on our profitability came from inflation which impacted heavily on our core customers,” Mr Joseph noted.
With over 13.4 million subscribers, Safaricom’s customers are mainly in the lower end of the consumption bracket, highly vulnerable to change in prices.

Largely driven by effects of the post-election violence and drought, food prices remained high over 2008 to average above 30 per cent.

Overall inflation has also remained high, oscillating between 25 per cent and 31.1 per cent, meaning that each month Kenyan consumers’ purchasing power reduces by at least a quarter, pushing the poor to survival mode where food becomes a priority.

High oil prices and volatile foreign exchange have also played a part in cutting on the growth pace, as they added to operational costs which went up by about 22 per cent.

Going forward, the company could get reprieve as tariff pricing is set to normalise with some of its competition calling off the price war. Last week, Zain announced a tariff price increase saying the time for price wars was over.

Safaricom has also registered marked growth in alternative revenue sources as it seeks to reduce its reliance in call revenue (currently at 83 per cent of total revenue) with data business registering 83 per cent growth to account for 13 per cent of total revenue.

M-Pesa has also registered notable growth with over 6 million subscribers against 2 million users last year.

Status of Mobile Telephony in Kenya for 2008/2009

The Communications Commission of Kenya (CCK) has a very interesting report for the second quarter of 2008/2009.

It is during this period that Telkom Kenya (read Orange) and Econet Wireless (read Yu) started rolling out their services in September and November 2008 respectively, bringing to four the number of licensed mobile operators in Kenya. This has led to expectations that the completion will lead to reduced costs, which it has and this is a story for another day.

There was increased mobile phone subscription of 11.9% between October and December 2008, and this is attributed to the entrance of the two mobile operators.

Indicator	Dec-07	Dec-08	Change (%)
Number of mobile subscribers	11,349,412	16,233,833	43.04
Mobile Penetration (%)	28.97	43.64	50.64

 

Source: CCK database

 

Again, the increase in mobile penetration was attributed to the increase in the number of mobile operators, increased mobile coverage and availability of low denomination calling cards, as low as Ksh. 20 (USD 0.25) introduced by both Safaricom and Zain.

In terms of mobile traffic there are quite a number of facts interesting to look at:

Indicator	Jul-Sep 07	Sep-Dec 08	Change (%)
Mobile to fixed traffic (Minutes)	5,799,400	9,778,341	68.6
Local mobile traffic	680,792,168	2,606, 590,177	282.88
Local SMSes sent	670,192,766	361,862,632	-46.01
Approximate number of data users (GPRS/EDGE, HSPDA, EVDO)	388,199	392,964	1.23

 

What is interesting to note was the effect Safaricom had on the statistics simply by offering free call promotion during September to December 2008 period. This saw an increase of 68.6% in mobile to fixed traffic and similarly a 282.88%in local mobile traffic, hence the reduction in the number of local smses sent. The interesting point to note is that the mobile telephony sector has spawned mobile Internet users to stand at 392,964 as at December 2008. It would be again be interesting to see how the numbers change towards the end of 2009, with Orange and Zain having promotions of the Internet modems from zero cost to Ksh. 5,000 (USD 62.50) on prepaid basis, with per minutes rates at USD 0.0125 to USD 0.0375 per KB downloaded.

Source: CCK database

The report can be downloaded from the CCK using this link.

Safaricom’s Okoa Jahazi

Safaricom is 12 years old and the largest mobile company in terms of subscriber base that stands at 12 million (or 32 % of Kenya's population) and has just launched a service product that is surely spinning heads among its competitors.

The service Okoa Jahazi (English translation might mean Save my Day) that offers Ksh 50 (USD 0.625) airtime credit to its prepaid customers in situations when they cannot afford or access airtime. The credit is repayable within 72 hours on next purchase of airtime and is available to customers who have demonstrated use of their SIM for at least a year. But what makes it unique is the top up charge of Ksh 5 (USD 0.0625) which is 10% above what is "borrowed". With that sort of "interest" charged and looking at it 12 million subscriber base, it is being estimated that Safaricom will be making an additional profit of Ksh. 1.83 billion (USD 23 million) at the minimum in a year alone from this offer.

Let us wait and see how the balance sheet looks like at this time next year.

Source: http://www.eastandard.net/InsidePage.php?id=1144010907&catid=457&a=1

 

Mobile telephony in Kenya

Growth of the ICT and telecommunication sectors in the emerging and developing economies has been cited as a major factor in the economic development of African countries. In Kenya ICT has been singled out as one of the cornerstones of Vision 2003 and the perceived benefits of telecommunication has led to the belief that mobile telephony has positive and quantifiable economic benefits in terms of GDP growth, poverty reduction and bridging of the digital divide. However the real benefits of the mobile phone to the poor in the society is still a debatable argument in the ICT industry.

In the last 10 years the sector has seen an unprecedented growth in mobile phone ownership and usage. The once priced gadget (used to cost initially USD 3,000 and now costs an average of USD 250) that was a preserve of the politicians and business men is now accessible and owned by the majority of Kenyans. The Kenyan telecommunication sector was liberalized in 1998, which before then the state monopoly was through Telkom Kenya (now Orange).With the liberalization saw the entry of Safaricom (then a subsidiary of Telkom) and Celtel (now Zain ) in 1999 and recently Yu (2008).

The licensees were to initially roll out services in major towns and roads (under their license conditions); and the sector has witnessed growth both in terms of operators, geographical coverage and subscriber base. Currently there are four mobile operators i.e. Zain, Safaricom, Telkom and Yu. The subscriber base has also increased from fewer than 6,000 subscribers in 2000 to over 12 million Kenyans in December 2008 with 77% of the Kenyan population covered. This growth has not been without drivers, among them competition, availability of cheap phones, low tariffs and regulatory intervention at times.

Kenya had an economic growth rate of 6.1% in 2006 and the transport and communication sector was credited with being one of the key drivers of the growth. These statistics give credence to the general consensus that the mobile phone sector adds economic value but the question is what value can be attributed to improvement of domestic income among the poor if any. Kenya currently has an estimated population of 38 million people and it is estimated half of population (17million) lives below the poverty line. Some 70% of the income poverty is used on food related needs and there is need to establish percentage that is used to power the mobile phone companies profits given most of the subscribers are prepaid.

Delloite and GSMA released a study at the end of 2008 and found that mobile telephony accounted for 5.1% of the GDP (Ksh 182,832 million) in the same year. Kenya currently is experiencing unprecedented famine and lack of food, this leads to the question of whether the populace are foregoing some essential expenditure in order to own a mobile phone. Although some people use mobile phones for "beeping", it is surprising that over 50 per cent of Kenyans live on less than a dollar per day yet many are able to purchase and use mobile phones.