Friday, May 22, 2009

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.

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