BMI Kenya Telecommunications Report Q4 2014 - 04115036

Q4 2014
www.businessmonitor.com
KENYA
TELECOMMUNICATIONS REPORT
INCLUDES 5-YEAR FORECASTS TO 2018
ISSN 2045-1482
Published by:Business Monitor International
Kenya Telecommunications
Report Q4 2014
INCLUDES 5-YEAR FORECASTS TO 2018
Part of BMIs Industry Report & Forecasts Series

Published by: Business Monitor International
Copy deadline: August 2014
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Kenya Telecommunications Report Q4 2014
CONTENTS
BMI Industry View ............................................................................................................... 7
SWOT .................................................................................................................................... 9
SWOT ................................................................................................................................................... 11
Political ................................................................................................................................................. 13
Economic ............................................................................................................................................... 14
Business Environment .............................................................................................................................. 15
Industry Forecast .............................................................................................................. 17

Mobile ................................................................................................................................................... 17
Table: Telecoms Sector - Mobile - Historical Data & Forecasts (Kenya 2011-2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Wireline ................................................................................................................................................. 21
Table: Telecoms Sector - Wireline - Historical Data & Forecasts (Kenya 2011-2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Industry Risk Reward Ratings .......................................................................................... 23

Table: Q414 Africa RRR Table . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Market Overview ............................................................................................................... 28

Mobile ................................................................................................................................................... 28
Table: Regional Comparison . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Key Developments .................................................................................................................................. 28

Mobile Growth ...................................................................................................................................... 30
Market Shares ....................................................................................................................................... 31
Table: Kenya Mobile Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Subscriber Mix ...................................................................................................................................... 34

Table: Postpaid Vs Prepaid Subscriptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Usage ..................................................................................................................................................
Networks ..............................................................................................................................................
Mobile Content ......................................................................................................................................
Mobile Operator Tables ..........................................................................................................................
34
36
37
41
Table: Market Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Table: Safaricom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Table: Airtel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Table: Orange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Table: YU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Africa Mobile Content .............................................................................................................................. 44

Table: Selected Regional VAS Developments, H114 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Wireline ................................................................................................................................................. 51
Table: Internet Subscriptions By Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Table: Fixed/Fixed Wireless Broadband Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Table: Selected Wireline Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Industry Trends And Developments ................................................................................ 62
Page 4
Regulatory Development .................................................................................................. 63

Table: Kenya: Regulatory Bodies And Their Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Competitive Landscape .................................................................................................... 71

Table: Key Players - Kenya Telecoms Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Table: Selected Operator Financial Indicators (USDmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Company Profile ................................................................................................................ 72

Telkom Kenya ......................................................................................................................................... 72
Safaricom .............................................................................................................................................. 77
Regional Overview ............................................................................................................ 82

Table: HTA Footprint, July 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Demographic Forecast ..................................................................................................... 87

Table: Kenya's Population By Age Group, 1990-2020 ('000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Table: Kenya's Population By Age Group, 1990-2020 (% of total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Table: Kenya's Key Population Ratios, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Table: Kenya's Rural And Urban Population, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Glossary ............................................................................................................................. 91
Table: Glossary Of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Methodology ...................................................................................................................... 93
Industry Forecast Methodology ................................................................................................................ 93
Sources ................................................................................................................................................ 94
Risk/Reward Ratings Methodology ............................................................................................................ 95
Table: Risk/Reward Ratings Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Table: Weighting Of Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Page 5
BMI Industry View

BMI View: The imminent exit of YU Mobile from Kenya's mobile market will do little to ease the downward
pressure on mobile tariffs and operators' voice revenues considering the expected entry of mobile virtual
network operators into the market. As a result, we retain our view of revenue stream diversification as the
most sustainable growth strategy for service providers. The Kenyan market is suitable for the
implementation of telecoms crossover services and operators must explore opportunities to monetise the
delivery of these services in the same manner as they have done with mobile financial services.
Key Data
Kenya's mobile market grew by 1.7% quarter-on-quarter (q-o-q) in Q114, compared with a contraction of
2.9% q-o-q during the same period in 2013.
Mobile ARPU appreciation continued in 2014, with Safaricom recording a 10% year-on-year (y-o-y)
increase in mobile ARPU in the 12 months to March 2014.
The rate contraction in the fixed-line sector eased in Q114, with number of active lines decreasing by just
0.7% q-o-q.
The number of internet users in Kenya increased by 31.8% in the 12 months to March 2014.
Risk/Reward Ratings
Kenya is ranked 10th on BMI's Q414 Sub-Saharan Africa telecoms Risk/Reward Ratings (RRR),
unchanged from the previous quarter. The country's overall score was also unchanged at 46.9, above the
regional average aggregate score of 40.5. Kenya scores above average in all the four categories on our
ratings table. The industry rewards score is sustained by ARPU, while the launch of a more powerful
telecoms regulator, the Communications Authority of Kenya (CAK), reflects the industry risks score of 70.
Kenya's mobile telecoms market is one of the most dynamic in the region, but it is held back by low ARPUs
in the mobile sector and limited network coverage in the fixed-line sector. The country already has one of
Africa's most sophisticated economies, and we predict that rising incomes will see increased demand for the
goods and services related to the rise of middle class consumers.
Key Trends And Developments
Mobile financial services (MFS) has become an integral feature of telecoms and financial services delivery
in Kenya, with network operators, banks and other third-party solution providers working out strategies to
take advantage of the growth opportunities in the sector. In August 2014, the Central Bank of Kenya (CBK)
Page 7
revealed that the total value of MFS transactions in Kenya during H114 reached KES1.1trn (USD12.5bn),
up 26% y-o-y from KES872.1bn in H113. This was equivalent to an average daily transaction value of
KES6.2bn, compared with KES4.8bn in H113. The country had a total of 25.9mn registered MFS users at
the end of June 2014, up 9.2% y-o-y from 23.75mn in June 2013.
Meanwhile, the competitive landscape for MFS could change significantly in the coming quarters on the
back of notable strategic decisions by dominant MFS provider Safaricom. In July 2014, the operator
decided to open its agent network to its rivals, a move we believe is a litmus test for how granting access to
its M-Pesa platform to third parties could affect its revenues and business as a whole. Access to Safaricom's
85,000-strong agent network will eliminate the need for Airtel and Orange, as well as newly licensed
MFS-focused mobile virtual network operators (MVNOs), most notably Equity Bank, to recruit and train
agents, thus enabling the companies to rapidly expand their reach and potential MFS user base. In August,
Safaricom effected changes to its M-Pesa transaction charges, with the rates for from transactions falling by
up to 67%.
In July 2014, the Communications Commission of Kenya (CCK) was officially rebranded to the
Communications Authority of Kenya (CAK). The new identity follows the enactment of the Kenya
Information and Communication Act (KICA) Bill 2013. The change, which is now reflected on the agency's
website and other official publications, has been incorporated into our Kenya market report starting from
this quarter's update.
Page 8
SWOT
Kenya Mobile SWOT
Strengths
High growth potential owing to the relatively low penetration rate of 70.7% at the end
of December 2013.
Presence of internationally experienced operators Vodafone, Bharti Airtel and France

Tlcom should lead to efficiency and innovative services on the market.
3G services have been launched by Safaricom, Orange Kenya and Airtel.
Demand for mobile data services is strong; the growth of mobile payment services
such as Safaricom's M-Pesa has been particularly successful.
Weaknesses
ARPU levels are among the lowest in Africa.
Price war has put significant pressure on ARPU rates and margins.
Dominance of a single operator threatens the position of others and could discourage
investment.
Despite efforts by Safaricom and Airtel to expand their respective contract customer
base, growth has been slow and the sector remains highly dependent on prepaid
users.
Opportunities
The implementation of interoperability of mobile financial services (MFS) platforms will

drive growth and boost the application of the service.
VAS such as MFS providing additional revenue stream for operators, countering
detrimental impact of price wars.
Introduction of Mobile Number Portability in April 2011 will support market

competition.
Access to undersea cables enables mobile broadband at mass-market price points,

giving the market significant growth momentum.
Licensing MVNOs suggests the market is developing.
Page 9
Kenya Mobile SWOT - Continued
Threats
Tax increases on some traditional telecoms services and VAS would put more
pressure on operators' bottom line.
Further downward pressure on ARPUs, thanks to increased competition as more

operators enter the market, coupled with inevitable slowdown in growth will threaten
operator revenues.
Reduction of mobile interconnection charges could result in a loss of revenues for the
operators.
Potential loss of Essar and Orange from the market points to highly competitive
environment and lack of opportunities for even large international players to exploit.
Page 10
SWOT
Kenya Wireline SWOT
Strengths
Roll-out of multi-play services, with Wananchi offering triple-play services and Telkom
Kenya offering dual-play services, improves outlook for entire sector.
France Tlcom's operational control of Telkom Kenya means that the incumbent has
the benefit of France Tlcom's wide experience, and a ready supply of cash.
Growing competition exists in the broadband segment, with cable companies active
in densely populated areas and WiMAX development under way.
Weaknesses
Presence of pan-African cable operator Liquid Telecom.
Access to multiple submarine cable systems and a local internet exchange.
Fixed broadband access accounts for less than 25% of total broadband connections.
Insufficient investment in network infrastructure is a major limiting factor for network

expansion and upgrade.
Opportunities
The take-up of cloud-based solutions by SMEs bodes well for fixed broadband
subscriptions growth.
Safaricom is expanding its fixed-line portfolio in partnership with Vodafone Global

Enterprises (VGE). This will drive competition and innovation in the fixed-line market.
Liquid Telecom Kenya, formerly Kenya Data Networks, is re-entering the residential
market segment, a development we expect to drive growth and investment
Fixed-wireless technologies offer the best opportunities for expansion for voice and
broadband services.
The number of internet users in the country is growing rapidly, offering opportunities
for growth in internet subscriptions in the future.
Investment in alternative broadband internet technologies is gathering speed,

including WiMAX, fibre and high-speed cable.
Page 11
Kenya Wireline SWOT - Continued
SEACOM, TEAMS, EASSy and other cable projects are helping to bring lower cost
bandwidth to Kenya.
Threats
Fixed-line subscriptions declined faster than expected between 2011 and 2013.
The growing popularity of mobile internet services, particularly on 3G networks, will

continue to slow the uptake of fixed internet connection.
The exit of Orange from Telkom Kenya, amid declining connections and weak
revenues, is a negative sign for the overall attractiveness of the wireline market.
Page 12
Political
SWOT Analysis
Strengths
Weaknesses
Government committed to market-based economic reform.
Allied with the US in the strategically important Horn of Africa region.
Perceptions of corruption are a hindrance to the government's image both at home

and abroad.
Opportunities
Sharp ethnic divisions.
Weak, inefficient security services.
The peaceful outcome of Kenya's presidential election bodes well for investor
confidence on a two-year view
Kenya is seen as a key player in the volatile Horn of Africa region as exemplified by its
military involvement in neighbouring Somalia. Its regional actions could increase its
clout in the international arena.
Threats
The relationship between the Kikuyu and Luo communities will pose a rising security
risk ahead of the 2018 elections, particularly if President Uhuru Kenyatta proves
unable to fulfil his pledge to lead and serve the interests not only of those who voted
for him, but also those who did not
Terrorist attacks in response to Kenyan forces' presence in Somalia.
Religious tensions have increased since the onset of the Kenyan military operations in
Somalia and could escalate as involvement in Somalia continues.
Ongoing tensions between Kenya's different ethnic groups could boil over into
violence, especially around election times.
Page 13
Economic
SWOT Analysis
Strengths
Weaknesses
Opportunities
Kenya's broad-based economy reduces its vulnerability to commodity price shocks.
Rapidly growing technology sector.
Upbeat long-term growth prospects.
Strategically advantageous location in the East African Community.
Increasing ties with China bode well for trade and investment.
Entrenched perceptions of corruption make for a sub-standard business environment.
Unemployment levels are high, and crime is not uncommon.
Being a relatively advanced economy, Kenya could serve as a springboard for

international firms looking to enter Sub-Saharan Africa.
Kenya can benefit from the increasing integration of the East African Community,
primarily through growing intra-regional trade.
Threats
Kenya's lacklustre productivity gains risk reducing the country's export

competitiveness.
The weather poses risks to growth, inflation, the currency and the balance of
payments position.
Page 14
Business Environment
SWOT Analysis
Strengths
The government has demonstrated its commitment to prudent and business-friendly

economic policy.
Kenya is one of the most diversified economies in Sub-Saharan Africa, making it less
susceptible to shocks.
The deepening financial markets in the country make it easier for corporates to hedge
risk and prevent asset-liability mismatch.
Weaknesses
Youthful and growing labour force is relatively well educated.
Widespread international and domestic perceptions of corruption make for a lessthan-ideal environment in which to conduct business.
The propensity for droughts is a key weakness, as they can prompt spikes in inflation,
given the importance of food prices to headline consumer price inflation, and can
affect the hydroelectricity production on which Kenya relies.
Infrastructure, although relatively developed by regional standards, remains a major

impediment to economic development.
Opportunities
Kenya's economic strength and location on key shipping routes to the Indian
subcontinent make it a suitable launching pad for firms looking to expand into Africa.
Kenya could attract more significant foreign direct investment if it markets itself
appropriately.
Issuance of external tradable debt would help to fund long-term investment projects
but also provide foreign investors with a mechanism through which to assess risk with
greater clarity.
Threats
Instability in neighbouring Somalia brings multiple risks, through refugee flows across
the porous border and security threats with potential for the conflict to spread.
Page 15
SWOT Analysis - Continued
Violence in the aftermath of the December 2007 presidential elections illustrates the
security risk stemming from social instability and ethnic tension.
Failure to address the country's infrastructure deficit would exacerbate existing

economic and social issues.
Page 16
Industry Forecast
Mobile
Based on market data published by Kenya's telecoms
Industry Trends - Mobile
regulator, the Communications Authority of Kenya

(2011-2018)
(CAK), and leading mobile network operators, we

calculate that there were 31.830mn mobile
85
60,000
subscriptions in the country at the end of March

2014. This was a growth of 1.7% quarter-on-quarter
80
40,000
(q-o-q), a considerable improvement on growth of

just 0.02% q-o-q in the previous quarter and a 2.9%
75
20,000
70
q-o-q contraction during the same period in 2013.

The return to strong subscriptions growth is in line
with our expectations; therefore there is no change to
the five-year growth forecast, through to 2018, in
this quarter's update to our report.
For the full year ended December 2013, the CAK
65
2011
2012
2013 2014f 2015f 2016f 2017f 2018f
Cellular Mobile Phone Subscribers, '000

Mobile Phone Subscribers/100 Inhabitants
3G & 4G phone subscribers, '000
f = BMI forecast. Source: National sources, BMI
reported that there were 31.309mn subscriptions, up

by 1.9% year-on-year (y-o-y). The weak
performance was mainly due to the removal of 882,000 inactive users in Q113. SIM discounting is a
common occurrence in predominantly prepaid markets such as Kenya, and poses one of the major downside
risks to our forecasts, as they can take place at random and are difficult to forecast. Despite this, we expect
growth to pick up in 2014 and the remainder of our new five-year forecast period to 2018.
Some of the other key factors expected to impact on subscriptions growth over our forecast period include
the disconnection of unregistered and inactive lines, the reduction of mobile termination rates (MTRs) and
operators' willingness to embark on potentially expensive but less-rewarding network development projects
in rural areas. BMI notes that operators seem to be more interested in deploying high-value services such as
mobile data in urban areas to drive revenue growth rather than expanding their networks to rural areas
which are characterised by low ARPUs and high operating costs. However, the increasing penetration rate
indicates that demand from as-yet unconnected subscribers remains high. Our current forecast shows mobile
subscriptions will reach 40.018mn in 2018, a penetration rate of 79.4%.
Page 17
In terms of 3G connections, we estimate the number of subscriptions rose to around 6.5mn at the end of
2013, equivalent to around 20.6% of the total mobile subscriber base. Mobile data is a popular way to
connect to the internet, with 99.2% of all internet connections in the country - as of December 2013 happening through mobile devices, although only a fraction of those are based on 3G connections. The
Kenyan 3G market has seen very fast-paced growth over recent years, and BMI believes that this is likely to
continue throughout 2014 and beyond, driven by falling tariffs, wider network coverage and increasing
availability of 3G-enabled devices.
Table: Telecoms Sector - Mobile - Historical Data & Forecasts (Kenya 2011-2018)
2011
Cellular Mobile Phone
Subscribers, '000
Mobile Phone Subscribers/100
Inhabitants
2012
2013
2014f
2015f
2017f
2018f
28,081.0 30,731.0 31,309.0 33,056.0 34,841.1 36,705.1 38,440.1
40,017.7
66.8
71.2
70.6
72.6
3,900.0
4,850.0
6,460.0
7,958.7
3G & 4G market, % of mobile

market
13.9
15.8
20.6
24.1
26.6
29.6
32.4
35.0
Monthly Blended ARPU, KES
412.1
443.8
442.9
446.2
437.6
425.5
417.6
413.6
3G & 4G phone subscribers, '000
74.5
2016f
76.5
78.2
79.4
9,258.8 10,863.9 12,439.2
14,020.2
Page 18
ARPU
BMI calculates the overall weighted ARPU figure for the Kenyan mobile market on the basis of
Safaricom's data and our analysis of competitive dynamics. The most significant factor pushing up ARPU
for Safaricom was the continued rise in M-Pesa ARPU as well as the upward revision in mobile tariffs
following the easing of price competition in the mobile market. Kenya's other mobile operators, Airtel,
Essar YU and France Tlcom-backed Orange Kenya, do not publish ARPU figures on a regular basis.
However, we believe that their ARPU rates are below those of Safaricom because of their weaker market
position and their dependence on promotions and offers to boost market share.
The jump in ARPU seen by Safaricom is in line with our monthly blended ARPU forecast for the Kenyan
market. Safaricom publishes ARPU figures every six months (for the quarters ended March and
September). Safaricom ARPU figures showed significant increases on a y-o-y basis in the 12 months to
March 2014. According to data published by the operator, monthly blended ARPU rose 10.1% y-o-y to
KES558 in March 2014, up from KES507 in March 2013. . The operator's ARPU crossed the KES500 mark
for the first time since early 2008 in Q113.
BMI expects mobile ARPU in Kenya to remain under pressure for the foreseeable future, partly because
majority of new subscribers will come from low income segments of the consumer base such as students
and rural dwellers. We also expect the launch of commercial services by the newly licensed MVNOs to
weigh on mobile tariffs. Further cuts to termination rates will also squeeze monthly blended ARPU,
although the timing of cuts is uncertain and has been subject to significant delays. Countering these
downward pressures will be the impact of 3G service uptake, smartphone demand and VAS such as mobile
financial services (MFS) - all of which will help to compensate declining contributions from traditional
services. On balance, BMI believes that ARPUs will decline gradually over the duration of our five-year
forecast to reach KES414 by 2018.
Page 19
Industry Trends - Mobile ARPU

2011-2018
450
440
430
420
410
2011
2012
2013
2014f
2015f
2016f
2017f
2018f
Kenya - Monthly Blended ARPU, KES
Page 20
Wireline
Table: Telecoms Sector - Wireline - Historical Data & Forecasts (Kenya 2011-2018)
Main telephone lines in service,

'000
Main Telephone Lines/100
Inhabitants
Internet users, '000
Internet users/100 inhabitants
2011
2012
2013
2014f
2015f
2016f
2017f
2018f
284.0
251.6
205.9
192.5
184.6
178.1
174.4
171.8
0.7
0.6
0.5
0.4
0.4
0.4
0.4
0.3
11,305.0 16,237.0 21,529.2 23,940.5 25,281.1 26,090.1 26,562.4
26,828.0
26.9
37.6
48.5
52.6
54.1
54.4
54.0
53.2
Broadband internet subscribers,

'000
250.0
410.0
638.0
832.6
999.9
1,149.9
1,305.2
1,470.9
Broadband internet subscribers/

100 Inhabitants
0.6
0.9
1.4
1.8
2.1
2.4
2.7
2.9
The rate of decline of Kenya's fixed-line subscriber

base eased considerably in Q114 according to
Industry Trends - Wireline Sector
market data published by the Communications
(2011-2018)
Authority of Kenya (CAK). The market contracted

by 0.7% quarter-on-quarter (q-o-q) in the three
months to March 2014 to reach 204,354 lines,
2,000
1,500
compared with a 12% q-o-q contraction over the

same period in 2013. The improved performance,
1,000
which we attribute to growing demand for

incumbent operator Telkom's fixed-wireless service
500
and the uptake of multiplay services by alternative

0
operators, has led us to revise our five year growth,

through to 2018. Although we expect the number of
2011
2012
2013
2014f
2015f
2016f
2017f
2018f
Main telephone lines in service, '000

Broadband internet subscribers, '000
connections to continue in a downward trend over

our forecast period, we now envisage a less steep
decline, especially in 2014 and 2015. For the full
year ended December 2013, the CCK reported that

there were 205,856 fixed-line subscriptions in Kenya, a decline of 18.2% year-on-year (y-o-y). We believe
that business customers in major urban centres, which make up more than half of the main fixed-line
market, will sustain the market in the short term as they are less susceptible to fixed-to-mobile
Page 21
substitution. Safaricom has announced plans to participate in this market in partnership with parent
company Vodafone Group. Despite this, the sector could fall victim to the effect of VoIP in the long term.
With the advancement of broadband services in the market, BMI believes that businesses and private users
are likely to use VoIP to make cheaper calls. Our revised forecast estimates that the market will have around
172,000 connections at the end of 2018, a penetration rate of 0.3%.
The Communications Commission of Kenya (CCK) estimates there were around 21.l679mn regular internet
users in the Kenya at the end of March 2014, most of them accessing the internet via smartphones and other
handheld devices. This figure is in line with BMI's growth expectations, therefore there is no change to our
internet forecast this quarter. However, we have included mobile data subscriptions through internet dongles
in our broadband estimates. We estimate that 10-15% of 3G subscriptions in Kenya are based on dedicated
data cards, leading to an upward review of our total broadband data. We now estimate there were around
638,000 broadband connections in Kenya at the end of December 2013, a penetration rate of 1.4%.
BMI expects sustained growth in the Kenyan broadband market over the medium- to long-term given the
new submarine connections that have recently reached the Kenyan coastline and continued investments in
mobile and wireline broadband infrastructure. Consumer demand exists, and with international bandwidth
becoming available at lower cost, the industry is approaching an attractive price point that will enable
broadband access to enter the mainstream. We forecast 832,000 broadband subscriptions at YE14, equating
to a penetration rate of 1.8%. By 2018, we expect almost 1.5mn broadband subscriptions giving a
penetration rate of nearly 3%.
Page 22
Industry Risk Reward Ratings

There are 36 countries in our telecoms Risk/Reward ratings (RRRs) for Sub-Saharan Africa. Despite the
diversity of these markets in terms of key macroeconomic and industry-specific factors, there are a number
of common market trends which have a direct impact on the performance and growth outlook of telecoms
service providers and their suppliers. These include sluggish subscriptions growth, increasing data
consumption, declining ARPUs and poor service quality. Our Q414 regional RRRs incorporate these trends,
along with other industry-related and country risk factors, in the analysis of the overall attractiveness of the
telecoms market in each of the 36 countries in our coverage.
Five of 36 countries saw changes to their aggregate scores this quarter. Benin was the biggest gainer among
these countries, climbing seven places to 13th position on our table following a 4.5pt increase in its
aggregate score. Mali moved up one place into 22nd position while Mauritius remained static in 16th
position, despite a rise in its aggregate score. Ghana and Malawi were the only two countries that recorded
declines in their aggregates score this quarter. As a result, Ghana dropped two places to fifth while
Mauritius dropped one place to 25th. These movements led to changes in the overall rankings, especially in
the middle of the table where the aggregate scores of the countries in that section are within a narrow range.
There were no changes at the top and bottom of our table this quarter, with Nigeria retaining the top spot
with an aggregate score of 54. Gabon is second on 53.6. Togo and Eritrea occupy the last two positions with
aggregate scores of 28.2 and 25.2 respectively.
Industry Rewards
The average regional Industry Rewards score was unchanged at 32.8, despite changes to the scores of four
countries in this category. Ghana recorded a decline in its Industry Rewards score owing to slower
subscriptions growth and market saturation, but this was counterbalanced by increases in the Industry
Rewards scores of Benin, Mauritius and Mali. The uptick in the Benin and Mali's scores were due to betterthan-expected subscriptions growth in FY13 and Q114, while Mauritius benefitted from an uptick in ARPU
and strong demand for data services. Mali recorded a 12.7% q-o-q subscriptions growth in the mobile sector
in Q114, compared to 7% during the same period in 2013, despite the country's mobile penetration rate
rising above 120%.
Regionally, Angola has the highest Industry Rewards score at 52.3. The country's score reflects strong
mobile subscriptions growth and relatively high ARPU levels. However, there are limited investment
Page 23
opportunities owing to the lack of liberalisation and the government's a strong interest in the sector. Other
high scoring countries are Nigeria, South Africa, Ghana and Gabon. One common factor between these
countries the rising demand for data services, which we expect to shape the telecoms sector in these
countries in the future. Gabon is expected to record the fast growth in data services, mainly due to low base
effects, after Airtel launched commercial 3G services in March 2014 and Etisalat-backed Moov announced
plans to follow suit before the end of the year.
Togo has the lowest score Industry Rewards score in the region at 15.4. However, we highlight risks to the
upside for the country's score from efforts by the government to boost competition in the mobile market
through various means, including licensing a third mobile operator. In June 2014, the country's Council of
Ministers announced a tender for a new licence and will permit 3G and 4G mobile services. Presently, the
Togolese mobile market is a duopoly, resulting in uncompetitive tariffs and general apathy for the extension
of network services to rural areas.
Country Rewards
Our Country Rewards ratings assess the capacity of
Rising Penetration, Declining

Growth
Sub-Regional Subscriptions Growth Trends
consumers to spend on telecoms services based on

key macro indicators such as GDP per capita,
urbanisation and unemployment rates. Gabon is the
outperformer in this category given the country's
GDP per capita of more than USD11,000. This is a
major factor in the country's relatively high ARPU,
even for basic voice services; although we caution
that high inequality in wealth distribution ultimately
reduces the pool of subscribers with the capacity to
pay for expensive telecoms service.
Malawi was the only country that saw a change in its
100
25
80
20
60
15
40
10
20
0
2011
2012
2013
2014f 2015f 2016f 2017f 2018f
East and Central Africa Mobile subscribers, '000, % y-o-y (RHS)

West Africa Mobile subscribers, '000, % y-o-y (RHS)
West Africa Mobile penetration, % of population (LHS)
East and Central Africa Mobile penetration, % of population (LHS)
Southern Africa Mobile subscribers, '000, % y-o-y (RHS)
Southern Africa Mobile penetration, % of population (LHS)
f = BMI forecast. Source: BMI
Country Rewards score this quarter. Malawi's score

decreased by 3.4pts to 33.3, mainly due to impact of
reduced foreign aid on the country's economic
output. Malawi's score is now level with Burundi's and slightly higher than that of the Democratic Republic
of Congo (DRC), which is the lowest in the region. The DRC and Burundi perform poorly across the key
Page 24
metrics of our Country Rewards ratings, with some of the lowest GDP per capita and urbanisation rates in
the region.
Industry Risk
There are no changes in the Industry Risk category this quarter, with the regional average remaining at 50.3.
BMI notes that regulatory risks vary significantly across the region given the different degrees of market
liberalisation and government interest in the telecoms sector. There are five countries with the highest score
of 70 out of 100. These are Nigeria, Ghana, the DRC, Kenya and Rwanda. In addition to maintaining a high
level of market liberalisation, the telecoms regulators in these countries have demonstrated high levels of
independence in the performance of statutory functions while also promoting fair competition between
market players. This is vital for maintaining investor confidence in the telecoms sector, especially for longterm capital intensive projects.
BMI notes that telecoms regulators across the region have in recent quarters stepped up pressure on
operators to improve quality of service (QoS) standards. We consider this a positive regulatory move
considering the benefit to consumers and the relatively high level of transparency in the imposition of
sanctions and penalties on defaulting operators. In many cases, this has led to the allocation of significant
resources for network upgrade and expansion to meet set QoS standards. In June 2014, MTN announced
plans to invest XOF120bn (USD250mn) on network upgrades in Cte d'Ivoire following QoS fines of
XOF3bn to the country's mobile operators.
The two underperformers in our table are Eritrea and Ethiopia, each with a score of 15. Both countries have
the least liberalised telecoms sectors, with the government still owning and controlling the incumbent
operator which also has a monopoly status. As a result, the policies and regulations of the telecoms
regulator, as in the case of Ethiopia, are primarily designed to protect the interest of the incumbent and
prevent any form of competition that may affect their revenue streams.
Country Risks
There are also no changes to our Country Risks outlook for the 36 countries in our coverage, although we
highlight the potential of some developing events to impact on our future outlook, either positively or
negatively. The most salient risks are political in nature. Sudan and South Sudan are experiencing political
unrest, with direct consequences for economic growth. Political unrest is increasing across Sudan,
particularly in the Darfur states, South Kordofan, and Blue Nile, which are all seeing fighting between the
national military, its proxies, anti-government forces, and a myriad of tribal militias. Economic growth in
Page 25
South Sudan will depend on the ability of political leaders to resolve the country's ethnically charged
political crisis, which has displaced over a million people.
Some countries in the region are billed to hold general elections within the next one year. Many of these
elections have the potential to heighten ethnic tension and, in extreme cases, lead to violence. Nigeria and
Cote d'Ivoire are among countries expected to hold potentially divisive elections in 2015.
Kenya, Nigeria and Uganda face significant threat from terrorist attacks, leaving their neighbours,
particularly Chard and Cameroon, vulnerable to spill over attacks or tasked with the responsibility of
accommodating displaced persons. Private consumption in north Nigeria is likely to come in lower than we
had previously expected owing to militant attacks and the increasingly cautious stance of investors.
However, it is worth noting that this impact will be isolated to the north east where the attacks have been
taking place and will negatively affect demand for staple rather than luxury goods given that people from
this part of Nigeria are generally poorer than elsewhere.
High oil prices are helping to drive economic growth in resource-rich countries such as Gabon and Angola,
but this comes with vulnerability to sudden moves caused by changes to global oil prices. We remain
bullish on the prospects for Angola's petroleum sector over the medium-to-long term; however, the country
has seen oil production fall consistently short of expectations in recent years.
Table: Q414 Africa RRR Table
Rewards
Risks
Industry
Rewards
Country
Rewards
Industry
Risks
Country
Risks
Telecoms
Score
Rank
Previous
Rank
Nigeria
49.9
45.6
70.0
64.1
54.0
Gabon
42.8
73.3
50.0
58.0
53.6
Angola
52.3
57.3
30.0
68.2
52.5
South Africa
46.3
54.6
65.0
52.3
52.0
Ghana
46.3
50.0
70.0
54.8
52.0
Botswana
38.5
56.0
60.0
64.8
50.0
Cote d'Ivoire
40.4
53.3
60.0
53.4
48.5
Senegal
40.0
50.0
60.0
58.4
48.2
CongoBrazzaville
32.5
63.3
65.0
50.2
47.6
Kenya
37.5
45.0
70.0
55.2
46.9
10
10
Cameroon
33.8
56.7
50.0
54.2
44.9
11
11
Country
Page 26
Q414 Africa RRR Table - Continued
Rewards
Risks
Zambia
33.3
40.8
55.0
63.0
42.8
12
12
Benin
35.0
46.7
50.0
48.5
42.1
13
20
Rwanda
30.9
36.7
70.0
54.1
41.6
14
13
Uganda
34.4
36.7
50.0
60.2
41.2
15
14
Mauritius
35.0
35.0
50.0
60.2
41.0
16
16
Mauritania
35.0
44.4
40.0
47.8
40.0
17
15
Namibia
30.4
45.3
40.0
59.6
39.9
18
16
Tanzania
27.0
39.3
60.0
56.5
39.4
19
17
DRC
33.3
32.1
70.0
38.2
39.2
20
18
Mozambique
31.3
35.4
50.0
49.0
37.7
21
19
Mali
35.0
39.0
40.0
40.0
37.5
22
23
Burkina Faso
27.5
36.7
55.0
50.1
37.3
23
21
Zimbabwe
37.5
39.0
40.0
29.1
37.0
24
22
Ethiopia
35.0
40.3
15.0
51.0
35.7
27
26
Malawi
24.8
33.3
60.0
46.5
35.4
25
24
Guinea
25.0
40.0
60.0
34.4
35.3
26
25
Chad
27.5
38.3
50.0
36.4
34.9
28
27
South Sudan
28.8
47.0
20.0
40.4
33.7
29
28
CAR
23.8
38.7
60.0
25.8
33.1
30
30
Sudan
26.1
42.3
40.0
31.8
33.0
31
31
Sierra Leone
20.0
46.7
25.0
56.4
32.7
32
32
Burundi
22.5
33.3
60.0
33.5
32.4
33
29
Madagascar
21.4
36.0
55.0
31.2
31.5
34
33
Togo
15.4
39.0
30.0
47.3
28.2
35
34
Eritrea
24.8
36.7
15.0
18.3
25.2
36
35
Average
32.8
44.0
50.3
48.4
40.5
Scores out of 100, with 100 highest. The Telecoms Risk/Reward Rating comprises two sub-ratings 'Rewards' and 'Risks'.
Scores are weighted as follows: 'Rewards': 70%, of which industry rewards 65% and country rewards 35%; 'Risks': 30%,
of which industry risks 40% and country risks 60%. The 'Rewards' rating evaluates the size and growth potential of a
telecoms market in any given state and country's broader economic/socio-demographic characteristics that impact the
industry's development; the 'Risks' rating evaluates industry specific dangers and those emanating from the state's
political/economic profile, based on BMI's proprietary Country Risk ratings that could affect the realisation of anticipated
returns. Source: BMI
Page 27
Market Overview
Mobile
Kenya's mobile penetration rate was 72.4% at end-2013 and the 16th highest among the 26 countries in our
Sub-Saharan Africa coverage, while the forecast CAGR of 5.0% over the five years to 2018 is ranked 12th
in the region. The relatively weak subscriptions growth outlook is due to a combination of factors, including
strong implementation of inactive SIM discounting, reduced incidence of multiple SIM ownership owing to
MNP and lower MTRs, as well as the sluggish network expansion to underserved areas. We expect
operators to increase their focus on high-value services in future, a development that will boost 3G
penetration and sustain ARPU levels.
Table: Regional Comparison
Kenya
Sub-Saharan
Africa
Rank (Out of 26)
CAGR 2013 - 2018 (%)
5.0
5.6
12
Mobile Penetration (%)
72.4
82.2
16
3G As % Of Mobile Market (%)*
20.1
13.4
6.1
6.4
11
ARPU (USD)*
*= out of 23 countries. Source: BMI
Key Developments
In August 2014, Airtel signed an agreement with Kenya Airways to host the latter as a mobile virtual
network operator (MVNO) on its network. Under the deal, the operator will provide an MVNO service
for Kenya Airways, subject to regulatory approvals. The MVNO will deliver mobile services such as
customer registration, SIM card issuance, billing and customer care to end-users in the airline, without
holding a spectrum licence. A process has already been started with the local telecoms regulator, the
Communication Authority of Kenya (CAK), and further details will be announced by the firms after
securing the necessary approvals.
In August 2014, Safaricom reduced M-Pesa fees by up to 67%. The operator said transactions between
KES10 (USD0.1) and KES1,500 will see charges drop by 67%, while fees levied on transactions above
KES1,501 will be charged at an average rate of 0.8% of the transaction value. The new tariffs take effect
from August 21 2014.
In August 2014, it was reported that Safaricom had opened negotiations with its UK parent company,
Vodafone, which could see the Kenyan operator pay less M-Pesa licence fees starting from April 2015.
As the inventor of the M-Pesa platform, Vodafone receives licence fees from Safaricom, calculated as a
fraction of M-Pesa's annual turnover. Vodafone currently receives quarterly payments pegged at about
11% of M-Pesa revenue as royalties. This resulted in total royalties of KES2.9bn from the KES26.56bn
M-Pesa revenue generated by Safaricom in the year to March 2014. In total, Vodafone has earned
KES9.6bn in royalties since the launch of M-Pesa in March 2007.
Page 28
In August 2014, Safaricom raised its bid amount for YU assets to KES10.5bn and signalled that it expects
to close the transaction in a few months. Safaricom had earlier set a price tag of YU assets at KES8bn.
The joint bid for yuMobile will see Safaricom acquire YU's base stations and equipment while Airtel will
acquire the firm's 2.7mn subscribers and its licences.
In August 2014, Orange partnered leading micro-insurer CIC Insurance Group to launch a mobile
insurance product, Orange Bima, which gives Orange mobile subscribers the opportunity to insure their
mobile devices. Orange Bima offers the service for a premium payment of KES1 a day, with subscribers
able to pay for their premiums using their airtime. Orange Mobile subscribers can also get a life cover
for daily, weekly or monthly premium payments with their airtime.
In July 2014, Microsoft has signed a deal with Safaricom to offer mobile subscribers the ability to
purchase Windows Phone applications (Apps) using their airtime. The price of Apps is set in Kenya
shillings. The move is expected to incentivise local tech start-ups to develop paid-for apps for the local
market.
In June 2014, Xpress Money partnered with Safaricom to offer money transfer services on the latter's MPesa platform in Kenya. The M-Pesa service on Xpress Money channels will be a phased rollout, starting
with the UK, UAE, KSA and Qatar in the first phase. In the subsequent phases, the service will go live
from other countries under the Xpress Money network, and is expected to be concluded by the end of
2014.
In June 2014, Safaricom partnered with Qatar Airways to launch a service that now enables customers
to pay for Qatar Airways tickets using M-Pesa. The service offers greater flexibility for Qatar Airways'
passengers who book tickets online or through the reservations office and pay for same from their mobile
phones.
In June 2014, Orange Kenya launched the first e-care app in the market, allowing subscribers to check
their credit balances, recharge accounts and manage their subscriptions to Orange. The myOrange app,
available on Android, is GPS-enabled and comes with a feature map that enables customers to locate
Orange and partner shops across the country. Customers will also be able to monitor their usage and
subscribe to Orange's promotions, products and services much faster. The app is zero rated and does not
deduct the user's data allowance when in use.
Page 29
Mobile Growth
Kenya's mobile market grew by 1.7% quarter-onquarter (q-o-q) in Q114 to 31.830mn subscriptions,
Kenya Mobile Market Growth

2011 - 2014
according to market data published by the CAK.

This performance amounted to a net addition of
522,000 subscriptions in the quarter, a significant
improvement on the net additions of just 6,000 lines
in the previous quarter. Despite the weak
performance in FY13, which included a 2.9%
contraction in Q113 owing to the deactivation of
2.4mn unregistered SIM cards, the market's quick
recovery in Q114 is indicative of strong
subscriptions growth potential as evidenced by the
relatively low mobile penetration rate, which stood
at 70.1% at the end of March 2014.
Source: BMI, CAK, operators
Kenya's mobile market is fiercely competitive, with

the country's three smaller operators - Airtel Kenya, Orange Kenya and Essar-backed YU - looking to
erode market leader Safaricom's dominance. Such is the level of competition that it has forced Essar to shut
down its network and exit the market, as a search for a take-over bid or a financial backer, was
unsuccessful. According to an agreement reached by the operators and the telecoms regulator, market leader
Safaricom will acquire YU's network assets while second-ranked Airtel will take over the operator's
subscribers and licences.
Page 30
Market Shares
BMI believes market leader Safaricom to have the
highest ARPU in the market, a figure it reports twice
Kenya Mobile Market Shares (%)

2011 - 2014
a year. Safaricom's ARPU plunged to a low of

KES437 in March 2011, which was the peak of the
price war in the mobile market that started around
six months earlier. However, the operator's most
recent data, covering the 12 months to the end of
September 2013, show ARPU to have begun
increasing again. Safaricom reported ARPU of
KES438 in September 2011, marginally higher in
than in March. ARPU appreciation accelerated in
2012, with the operator reporting ARPU of KES456
in March and KES491 in September. The trend
continued into 2013, with the operator's ARPU
edging above the KES500 mark for the first time
since 2008 to reach KES507 in March and then

KES548 in September. In March 2014, this stood at KES558, a continuation of the growth. We believe that
this trend is, to an extent, applicable throughout the market, with the intensity of the price war decreasing.
However, Safaricom's ARPU breakdown also reveals the central role of its VAS mobile banking service MPESA in driving ARPU development.
Page 31
Safaricom led the Kenyan market with 21.567mn
Kenya Mobile Market Shares (%)
subscriptions at the end of Q114. Safaricom
2011 - 2014
recorded net additions of 319,000 subscriptions,

compared to net losses of 393,000 subscriptions
during the same period in 2013. This gave the
operator a market share of 67.8%, marginally down
from 67.9% in the previous quarter but up from
65.1% a year earlier. Safaricom's market share
trended downwards from June 2010 to September
2012 as price competition intensified in the mobile
market. However, five consecutive upticks in the
operator's market share between Q412 and Q413
suggest that the price war is abating. We also believe
that Safaricom's non-voice services, especially the
M-Pesa mobile financial service (MFS), are key
factors in its ability to retain existing customers and
attract new ones, and while it continues to have

exclusive control over M-Pesa, it will remain dominant.
Despite the downward trend in Safaricom's market share and attempts to strengthen competition, the
operator remains significantly ahead of Airtel, the second placed operator, which had a 16.5% market share
at the end of Q114, unchanged from the previous quarter and down from 16.9% a year earlier. The operator
recorded net additions of 95,000 subscriptions in Q114 to bring its subscriber base to 5.251mn at the end of
March 2014. Although Airtel's net additions in Q114 was considerably less than that of its main rival
Safaricom, it was a significant improvement on the net losses of 348,000 subscriptions recorded in
Q413. Airtel's market share has trended upwards since it launched its low-margin, high-volume strategy in
2010 and the loss of subscribers in Q413 suggest many of these new subscriptions were deactivated.
However, even with this strategy, the rate of expansion has, so far, been underwhelming, a situation that
BMI attributes to the significant competitive advantage Safaricom has with its M-Pesa service.
YU recorded a fourth consecutive quarterly net loss in Q114 to further erode its market share. The operator
ended the quarter with 2.558mn subscriptions, a market share of 8% compared to 8.5% in the previous
quarter and 10.9% a year earlier. YU's strategy of attracting low-end subscribers using its basic 2G network
was partly responsible for its financial underperformance as its rivals managed to offset the impact of the
Page 32
price wars in the voice segment with revenues from high-value subscribers to their 3G data networks. As a
result, the operator is shutting down its operations, with Safaricom and Airtel splitting up its network
infrastructure and subscribers between them in a deal expected to conclude before the end of 2014. Based
on the operator's Q114 subscriptions data, the new Airtel-Yu entity will have a market share of
approximately 24.5% and a subscriber base of 7.809mn. While this is a much improved position, it still
trails Safaricom considerably.
The subscriber figures for Orange, published by parent company France Tlcom-Orange, differ
significantly from the figures published by the regulator, the CAK. France Tlcom-Orange reported
1.026mn subscriptions for Orange Kenya at the end of Q114. This is around 1.428mn subscriptions fewer
than the figures reported by the CAK. There is no explanation for this disparity, although the CAK has
confirmed to BMI that its figures for Orange were submitted by the operator. Our analysis is based on the
CAK's data considering that we also rely on the regulator for subscriber figures for Airtel and YU, which do
not publish operational data on a regular basis. According to the CAK's data, Orange recorded net additions
of 199,000 subscriptions in Q114 to bring its subscriber base to 2.454mn. Orange's market share expanded
0.6pps in the 12 months to March 2014 to 7.7%.
Table: Kenya Mobile Market
Q412
Q113
Q213
Q313
Q413
Q114
19,814
19,421
20,146
20,821
21,248
21,567
Net Additions ('000)
593
-393
725
675
428
319
Market Share (%)
64.5
65.1
65.9
66.5
67.9
67.8
5,205
5,052
5,219
5,504
5,156
5,251
91
-153
167
285
-348
95
16.9
16.9
17.2
17.6
16.5
16.5
2,485
2,128
2,132
2,209
2,255
2,454
-609
-357
77
-119
199
8.1
7.1
7.1
7.2
7.7
3,227
3,248
3,052
2,768
2,649
2,558
224
21
-196
-284
-199
-91
Market Share (%)
10.5
10.9
10
8.8
8.5
Safaricom
Subscribers ('000)
Airtel
Subscribers ('000)
Market Share (%)
Orange
Subscribers ('000)
Market Share (%)
YU
Subscribers ('000)
Page 33
Kenya Mobile Market - Continued
Total
Q412
Q113
Q213
Q313
Q413
Q114
30,731
29,849
30,549
31,302
31,308
31,830
Subscriber Mix
According to the regulator's data, there were 607,569 postpaid subscriptions in Kenya at the end of March
2014. Total postpaid subscriptions increased 8.4% q-o-q and 55.9% year-on-year (y-o-y), equivalent to net
additions of 218,000 postpaid subscriptions in the 12 months to March 2014. According to the regulator's
data, the number of prepaid subscriptions increased 1.5% q-o-q and 6% y-o-y to reach 31.222mn at the end
of March 2014. Despite the growth in postpaid subscriptions, the postpaid segment accounted for just 1.9%
of the total mobile subscriptions at the end of March 2014, although this was up from 1.3% a year earlier.
The breakdown of Kenya mobile operator's subscriber mix as published by the CAK shows that Safaricom
had the highest number of postpaid subscribers at 473,000 at the end of Q114. This was an increase of 9.7%
q-o-q. The rapid growth of the operator's postpaid subscriber base is indicative of a strategy to migrate it
customers to higher value postpaid contracts. Airtel had 130,000 postpaid subscriptions, followed by
Orange and YU with 3,070 and 1,520 respectively. YU's relatively weak subscriber mix confirms our view
that its growth strategy is predominantly based on boosting its subscriber base by targeting new phone users
with cheap 2G-based services.
Table: Postpaid Vs Prepaid Subscriptions
Q113
Q213
Q313
Q413
Q114
Y-o-Y
Change
Prepaid Subscriptions ('000)
29,459
30,117
30,846
30,749
31,222
6.00%
Postpaid Subscriptions ('000)
390
432
456
561
608
55.90%
29,849
30,549
31,302
31,309
31,830
6.60%
1.3
1.4
1.5
1.8
1.9
0.6ppts
Total Subscriptions ('000)

Postpaid As % Of Total Subscriptions
Source: BMI, CAK
Usage
BMI believes market leader Safaricom to have the highest ARPU in the market, a figure it reports twice a
year. Safaricom's ARPU plunged to a low of KES437 in March 2011, which was the peak of the price war
Page 34
in the mobile market that started around six months earlier. However, the operator's most recent data,
covering the 12 months to the end of September 2013, show ARPU to have begun increasing again.
Safaricom reported ARPU of KES438 in September 2011, marginally higher in than in March. ARPU
appreciation accelerated in 2012, with the operator reporting ARPU of KES456 in March and KES491 in
September. The trend continued into 2013, with the operator's ARPU edging above the KES500 mark for
the first time since 2008 to reach KES507 in March and then KES548 in September. In March 2014, this
stood at KES558, a continuation of the growth. We believe that this trend is, to an extent, applicable
throughout the market, with the intensity of the price war decreasing. However, Safaricom's ARPU
breakdown also reveals the central role of its VAS mobile banking service M-PESA in driving ARPU
development.
Safaricom ARPU (KES)

2010-2013
Source: BMI, Safaricom
Page 35
Networks
3G
Safaricom Network Infrastructure

2010-2013
The CCK granted Safaricom the first 3G mobile

licence in Kenya in October 2007 for USD25mn.
Safaricom secured a USD15mn refund in 2013
following a two-year legal battle initiated by the
operator against the CCK after rivals Airtel and
Orange paid USD10mn for their 3G
concessions. Safaricom launched a 3G network in
May 2008 with services in Nairobi and Mombasa,
and invested to expand coverage to other major
cities. The company has used the classic Vodafone
tactic of pursuing the mobile broadband market
among PC and laptop users with a USB modem
service, crucially offered over a prepaid platform
Source: BMI, Safaricom
since prepaid services dominate the market. The

response to the service has been impressive, and the
operator reports strong growth in data subscribers in its full-year reports for 2008, 2009 and 2010.
By March 2014, Safaricom boasted 3,140 2G enabled base stations and 1,847 3G-enabled base stations (and
208 WiMAX). Safaricom has aggressively expanded the coverage of its 3G network by upgrading existing
infrastructure in 2011-2013.
In August 2011, Orange launched 3G/HSPA network services in the country, offering speeds of up to
21Mbps. Orange signed a deal with Chinese telecoms equipment vendor ZTE in March 2011 to roll out a
3G network in Kenya. The service was initially offered in the capital Nairobi, Mombasa and Kisumu with
plans to extend coverage to other regions. Orange's initial actions suggests its strategy for the 3G market is
focused on competitive pricing for data services and advanced VAS. The operator has set data tariffs as low
as KES0.40 (USD0.0043) per MB. This is lower than Safaricom's lowest tariff of KES0.49 per MB on a
30GB data bundle, with a 90-day validity period. Price competition played a significant role in driving
subscriber growth in Kenya's mobile voice market during H210 and H111. We are not surprised that Orange
adopted a similar strategy in the data market, albeit with a lesser intensity. Meanwhile, the operator's first
major 3G-based VAS is the mobile HD Voice service unveiled alongside its 3G service. The HD Voice
Page 36
service, which enables customers to experience high-definition voice calls on the Orange network, was first
launched in Africa by Orange Uganda during July 2011.
In February 2012, Airtel launched commercial 3G services in Kenya. According to Airtel, its 3.5G network
has transmission speeds of up to 21Mbps. The service was initially available in Nairobi, North Coast,
Kisumu, Eldoret and Nakuru. The operator set an ambitious target to cover up to 85% of Kenya with its
3.5G network within nine months. Airtel's 3G services bode well for mobile data users in Kenya as the end
of the Safaricom and Orange duopoly in the 3G market should see the application of more competitive
pricing structures by operators. In March 2011, Airtel Kenya signed a five-year partnership agreement with
leading broadband infrastructure provider Kenya Data Networks (KDN) as part of its ongoing 3G network
deployment project. According to the terms of the partnership, KDN will inter-link Airtel 3G base stations
through its countrywide fibre-optic network. Airtel's partnership with KDN will boost the speed and lower
the cost of its 3G network roll-out. KDN already provides wholesale telecoms services through its 6,500km
fibre and radio infrastructure across East Africa. KDN is linked to submarine cables SEACOM, TEAMS
and EASSy and this gives operators connected to its network access to sufficient international bandwidth.
We expect the increased competition to lower mobile data tariffs, encourage network expansion to
underserved areas and boost the development of advanced VAS. We believe YU will underperform its
rivals in the mobile market because of its lack of 3G network services. Although the operator's 2.5G data
service attracted a considerable number of subscribers, it offers limited scope for higher value offerings
which could drive revenue growth to offset the shortfall from voice services due to intense price
competition.
In December 2012, Airtel parent company BhartiAirtel revealed that it would provide a sum of KES8bn
(USD91.4mn) to support its 3G network expansion plan. The Kenyan unit planned to grow 3G network
sites from the current 360 to 550 by May 2013. The 3G network expansion aims to benefit from the rising
number of mobile internet users in the country.
Mobile Content
The decline in voice revenues owing to intense price competition in that segment has led Kenyan mobile
operators to explore a wide range of non-voice services. Arguably the most prominent non-voice offering is
MFS, which is currently dominated by mobile market leader Safaricom through its popular M-Pesa
platform. According to the Central Bank of Kenya, total MFS transfers in the country reached KES1.1trn
(USD12.5bn) in H114, up 26% y-o-y from KES872.1bn in H113. Further breakdown of the figure also
show that total transactions value reached an average of KES186.4bn a month or KES6.2bn a day,
Page 37
compared with an average daily transaction value of KES4.8bn in H113. The country had a total of 25.9mn
mobile money subscribers at the end of June 2014, up 9.2% y-o-y from 23.75mn in June 2013.
Safaricom is the dominant player in Kenya's m-commerce market, mainly due to its first mover advantage
and the continuing popularity of its M-PESA money transfer service. Safaricom reported 19.3mn registered
M-Pesa customers at the end of March 2014, of which 12.16mn were 30-day active users. The operator's
market dominance is reflected by its more than 90% share of total transactions volume and value, according
to the operator and regulators' data.
Perhaps the biggest threat to Safaricom's dominance, and a potential game changer if implemented, is the
creation of an open access m-commerce platform. In July 2014, the operator decided to open access to its
network of M-Pesa agents, a move we believe will act as a litmus test for how granting access to its M-Pesa
platform to third parties could affect its revenues and business as a whole. Safaricom has previously
required all of its M-Pesa agents to sign an exclusivity agreement preventing them from processing MFS
transactions for any operator or company. With a network of 85,000 agents, M-Pesa truly responds to the
need for basic financial services in areas that will likely not be reached by traditional financial service
providers. By contrast, Airtel Money has a network of just 10,000 agents, while Orange has around 5,300
MFS agents.
Recent MFS Developments
In August 2014, Paynet Group, the operator of PesaPoint ATMs, said it is working on a plan to enable
customers to use their mobile phones instead of ATM cards to pay at mobile point of sale terminals
(mPOS). The platform is due to launch in September 2014. With the firm's mPOS solution, transactions are
documented by a smartphone or tablet instead of a regular checkout register.
In June 2014, iKaaz launched an NFC-and Bluetooth-powered cloud-based solution enables consumers to
make payments at select merchant outlets with their mobile phones. The solution works by attaching a tag,
which costs less than USD2, to any phone, converting it into a near field communication (NFC)-enabled
device for consumers while merchants plug a reader into their own mobile phones to turn them into mPOS
terminals. Customers can also link the iKaaz NFC tag to their bank account, pre-paid account, debit or
credit card to turn their device into an extension of that particular account. In addition to the NFC-based
solution, iKaaz also supports SMS-based payment transactions.
Safaricom has enhanced the M-Pesa Application Programme Interface (API) for subscribers to execute
faster mobile banking transactions as of May 2014. The API has been adjusted to settle an average
Page 38
transaction in less than 30 seconds from the previous two hours time. The API would also help in
streamlining operations for businesses to disburse staff salaries or receive payments through M-Pesa. The
M-Pesa service has provided financial liberation to Kenyans, according to Financial Services General
Manager Betty Mwangi-Thuo.
In June 2013, Safaricom announced plans to target small and medium-sized enterprises with a campaign
tagged Lipa Na M-PESA. The campaign is designed to promote the use of Safaricom's m-commerce
platform as the main payment system for goods and services. Safaricom launched a nationwide sensitisation
exercise for the first phase of Lipa Na M-PESA. The exercise aims to sign up more than 100,000 small- and
medium-sized companies by April 2014.
In February 2013, Safaricom partnered with KCB Group to allow M-PESA agents to secure loans from a
KES1.5bn unsecured loan facility. According to the partnership deal, M-PESA agents will be able to take
loans worth up to six times their average commissions earned over a six-month period. The new product
aims to ensure agents have sufficient liquidity to fulfil the rising customer transaction volumes on the MPESA platform.
In November 2012, Safaricom launched a mobile banking service dubbed M-Shwari in partnership
with Commercial Bank of Africa. The service mainly focuses on micro-savers and borrowers, who are
required to open a mobile bank account through their phones to evade the time-consuming traditional
banking. Loans to users attract a one-time facilitation fee of 7.5% of the borrowed amount and must be
repaid within a month of disbursement.
Other VAS Developments
In August 2014, Onfon Media, a value added telecoms service provider, partnered with Safaricom to
launch a service called Name Tunes on the Skiza Platform. Name Tunes is a ring back tone service offering
pre-recorded vocal definition of names, with a musical background tune to the subscribers. It allows
subscriber to select as many names as they can from a database of more than 50,000 local and foreign
names.
In August 2014, Safaricom partnered with developer Virtual City, to launch an application to enhance
service efficiency for the FMCG companies. The app, called M-Distributor, is available on android devices
and enables businesses to track sales transactions and deliveries, place orders and collect returns while in
the field in real time. It also enables mobile money payments through M-Pesa. Some companies, including
Page 39
PZ Cussons and Safaricom Airtime Dealers, have integrated M-Distributor into their supply chain systems
and processes, with successful results reported.
MVNOs
In April 2014, the Communications Authority of Kenya adopted a new strategy to promote competition in
the mobile market by awarding MVNO licences to three mobile commerce (m-commerce) companies.
The three companies awarded MVNO licences are Finserve Africa, a subsidiary of Equity Bank,
Tangaza Pesa-owned Mobile Pay Limited and Zioncell Kenya Limited. Tangaza's subsidiary currently
operates as a network agnostic m-commerce platform, with solutions for individuals, small and mediumsized enterprises and larger businesses. However, its reach is limited by a network of less than 500 agents.
Equity Bank is one of Kenya's leading retail financial services institutions, which announced plans to launch
as an MVNO earlier in 2014 and Zioncell is an m-commerce platform dedicated to church donations.
Mobile operator Orange has stated it does not wish to host MVNOs on its network, due to their negative
impact on quality of service, and Kenyan media have widely reported that all three MVNOs signed
wholesale agreements with Airtel.
Launching as MVNOs will allow the m-commerce companies to build a greater range of services and
simplify their business models, as they can now easily lease wholesale access from Airtel rather than hash
out complex network access agreements. But BMI is not convinced they will be able to add much value to
their businesses through expansion into mobile voice and data services. The purpose of MVNOs is
generally to offer very low value services to a segment of the market operators deem not worth pursuing.
However, the 2010-2013 price wars resulted in mobile operators chasing even the lowest-value subscribers
in Kenya's mobile market, and ultimately led to YuMobile's exit from the market in March 2014.
Nevertheless, we expect competition from the MVNOs, as well as increasing regulatory pressure on
Safaricom to open access to M-Pesa will begin to have an impact on its dominance in Kenya's m-commerce
market. In our view, the best long term solution for Kenya's mobile and m-commerce markets would be the
emergence of a network- and financial institution-agnostic m-commerce platform, which would allow for
much greater scale and the development of more complex financial services for subscribers. This would
then force Safaricom to compete with other mobile operators more directly on quality of service and other
non-voice services. In the meantime, despite putting pressure on Airtel's network capacity, hosting three
MVNOs will provide the operator with a stable source of revenue, which will in turn improve its ability to
invest in network upgrades and expansion and challenge its larger rival.
Page 40
Mobile Operator Tables
Table: Market Overview
Mar-12
Jun-12 Sep-12 Dec-12 Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
29,212
29,703
30,433
30,731
29,849
30,549
31,302
31,308
31,830
Q-o-Q Growth (%)
1.7
2.5
-2.9
2.3
2.5
0.0
1.7
Y-o-Y Growth (%)
15.9
17.5
14.9
9.4
2.2
2.8
2.9
1.9
6.6
28,957
29,430
30,135
30,429
29,459
30,117
30,846
30,749
31,222
254
273
298
302
390
432
456
560
608
1,131
492
729
298
-882
700
753
522
67.7
68.9
70.5
71.2
67.4
69
70.7
70.7
70.1
Subscriptions ('000)
Total Mobile Subscribers
Prepaid Subscribers
Postpaid Subscribers
No. of Net Additions
Market Penetration (%)
Table: Safaricom
Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14

Subscriptio
ns ('000)
Total number ('000)
19,075
19,007
19,221
19,814
19421
20,146
20,821
Market share (%)
65.3
64
63.2
64.5
65.1
65.9
66.5
67.9
67.8
No. of net additions
387
-68
214
593
-393
725
675
427
319
34
-13.8
29.4
198.8
44.6
103.6
89.6
7116.7
61.1
456
456
491
494
507
515
548
552
557.5
107,000
na
na
na 124,290
na
na
na
144,70
0
7,770
na
na
na
10,130
na
na
na 13,600
16,870
na
na
na
21,840
na
na
na 26,600
6,590
na
na
na
8,420
na
na
na 11,900
Net profit (KESmn)
12,630
na
na
na
17,540
na
na
na 23,000
EBITDA (KESmn)
37,490
na
na
na
49,180
na
na
na 60,900
35
na
na
na
39.6
na
na
na
Market share of net additions (%)
21,248 21,567
Subscriber
Usage
Blended monthly ARPU (KES)
Financial
Structure*
Annual revenue (KESmn)
SMS revenue
M-PESA revenue
Mobile and fixed data revenue
EBITDA margin (%)
42.1
Page 41
Safaricom - Continued

Capital expenditure (KESmn)
Capital expenditure as % operating
rev
25,280
na
na
na
24,880
na
na
na 27,800
23.6
na
na
na
25.3
na
na
na
19.2
* Annual data, na = not available. Source: BMI, CCK, Safaricom
Table: Airtel
Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13
Mar-14
Total Subscribers
4,483
4,914
5,114
5,205
5,052
5,219
5,504
5,156
5,251
Market share (%)
15.3
16.5
16.8
16.9
16.9
17.1
17.6
16.5
16.5
210
431
200
91
-153
167
285
-348 95
18.6
87.6
27.4
30.5
17.3
23.9
37.8
18.2
Source: BMI, CAK
Table: Orange

Total number ('000)
3,099
3,123
3,094
2,485
2,128
2,132
2,209
2,255
2,454
Market share (%)
10.6
10.5
10.2
8.1
7.1
7.1
7.2
7.7
209
23
-28
-609
-357
77
46
199
18.5
4.8
-3.9
-204.3
40.5
0.6
10.2
766.7
38.1
Source: BMI, CAK
Page 42
Table: YU

Total number ('000)
2,554
2,660
3,003
3,227
3,248
3,052
2,768
2,649
2,558
Market share (%)
8.7
9.9
10.5
10.9
10
8.8
8.5
324
105
344
224
21
-196
-284
-119
-91
28.7
21.4
47.1
75
-2.4
-28
-37.7
-17.2
Source: BMI, CAK
Page 43
Africa Mobile Content

Advanced non-voice services are an invaluable part of mobile network operators' market strategies amid the
commoditisation of basic voice and SMS services. Service providers with a diversified portfolio of locallyrelevant mobile content and value-added services (VAS) are better placed to sustain strong revenue growth
momentum and maintain a tight rein on churn rates. Our analysis of VAS deployments across the region
assesses key regional trends and their implications for local competition dynamics.
Econet and Safaricom's FY14 results underscore the growing importance of non-voice services to
operators' overall financial performance. Econet reported that non-voice services' contribution to total
revenues rose from 9.9% to 18.5% for FY14, ended February 28 2014, compared to a decline in the
contribution of airtime sales from 65% to 58% over the same period. Econet's non-voice service revenues
were driven by mobile data services, which saw a 62% y-o-y rise in revenues, and mobile financial services
(MFS), which saw a 307% y-o-y increase in revenues to USD33mn, albeit from a low base.
Safaricom's M-Pesa revenues reached KES26.6bn

(USD298.2mn) and contributed 18.4% to total
MFS Maintains Uptrend
revenues in FY14, ended March 31 2014. The
Kenya Mobile Payment Growth
operator reported 12.2mn 30-day active M-Pesa

users, accounting for 56% of its total subscriber
base. Safaricom's mobile data revenues increased
41% to KES9.3bn in FY14 while 30-day active
mobile data subscriptions increased 34% to 9.6mn,
equal to 44.4% of the operator's total subscriber
base.
MFS Maintains VAS Dominance
MFS is still the most popular non-voice service

offering in many countries in the region, especially
in countries where the service has taken off as
Source: BMI, CBK
evidenced by Econet and Safaricom's results. During

H114, we saw a major shift in sentiment among key stakeholders towards the interoperability of MFS
platforms. In our view, interoperability will boost the uptake of MFS by creating a larger pool of users
across multiple networks and facilitating the integration of MFS platforms with other payment channels.
Tanzania saw the first major move towards interoperability with Airtel, Tigo, and Zantel enabling an
Page 44
interoperable platform for their respective MFS services - Airtel Money, Tigo Pesa and EzyPesa - from the
end of June 2014. The move creates a potential user base of more than 18mn based on their respective
subscriber bases as of March 2014.
Following the announcement of the Tanzanian operators' move, we predicted that it will stimulate
discussions on MFS interoperability in other markets in the region. This view started playing out in July
with the East African Community (EAC) announcing plans to implement a common cross-border MFS
platform in Kenya, Uganda and Rwanda by mid-2015 and Safaricom deciding to open access to its network
of M-Pesa agents to rival MFS platforms. Safaricom previously required its 85,000 strong M-Pesa agent
network to sign an exclusivity agreement preventing them from processing MFS transactions for any
operator or company. However, the opening up of Safaricom's agent network will eliminate the need for
Airtel and Orange, with just 10,000 and 5,300 agents, as well as newly licensed MFS-focused MVNOs,
most notably Equity Bank, to recruit and train agents, thus enabling the companies to rapidly expand their
reach and potential MFS user base.
MFS is also making inroads into new markets, with Gabon standing out as the most notable market for the
service. Etisalat-backed Moov launched its mobile financial services (MFS) platform 'Flous' in Gabon in
partnership with local bank Orabank in June 2014. Moov will compete with Airtel and Libertis in the
MFS market. Airtel launched its MFS platform, Airtel Money, in Gabon in October 2013 in partnership
with pan-African bank Ecobank, while Libertis launched its MFS platform called Mobicash in April 2014
in partnership with Union Gabonaise de Banque (UGB). The launch of MFS offerings by Gabon's three
biggest operators within a short period is indicative of a shift towards non-voice services, with MFS central
to that strategy.
Mobile Information And Entertainment Gain Traction
Mobile network operators are leveraging the increasing access to smartphones and advanced mobile data
connectivity to roll out a wide range of mobile-based entertainment services, from information-based
services to music and video streaming. Unsurprisingly, the bigger operators are at the forefront of this trend,
a development we attribute to their superior capacity to negotiate distribution agreements with content
producers and their ability to generate a critical mass of users to justify investments in the service, both
from a revenue growth and a customer retention perspective.
Globacom (Glo), Airtel, MTN, Tigo and Vodacom are leading the way in the provision of mobile
entertainment services. Glo launched 10 new services to add to its rich VAS portfolio for customers in
Page 45
Nigeria in April 2014. There are now more than 50 VAS offerings on operator's platform, including
lifestyle, entertainment, sports, fun & games, news & entertainment, and religious & motivational services.
Tigo's music streaming offering is available to customers in Rwanda and the company plans to launch the
service in its other markets in the region.
For its part, MTN announced a partnership with Simfy Africa in June 2014 to launch a music streaming
service in South Africa. The service, which allows customers to listen to music online and offline, is priced
at ZAR49 (USD4.5) a month. The operator also announced plans to launch a music streaming app, dubbed
Music+, in Nigeria that would enable customers download songs for NGN50 (USD0.3). Vodacom is also
developing a music streaming service with the potential to attract significant attention. The operator is
reportedly in talks with Spotify for the service.
Airtel has expanded its strategic partnership with Wikipedia with further launches of the knowledge and
information service provided by both companies across Africa. Having trialled the Wikimedia Zero service
in Kenya in October 2013, Airtel launched the service in Nigeria in May 2014. However, the operator might
face still competition in offering the service in the region, with MTN launching a similar service in Rwanda
in June 2014 following a separate partnership agreement with Wikimedia Foundation.
Mobile Health Has Social Benefits
Generally, mobile health (m-Health) refers to the use of mobile technology to provide clinical care and nonclinical services, such as health education, disease surveillance and drug monitoring. We believe that the
continued growth in the demand for healthcare, the sustained growth in mobile subscriptions, and the
growing sophistication of communications network infrastructure is creating new opportunities in m-Health
across the region. In March 2014, Orange partnered with the Cameroonian Ministry of Health to launch an
m-Health service called My Healthline. The real-time service operates as a helpline where members of the
public can send their personal, anonymous questions to and receive a response from a specialist medical
professional within one hour. My Healthline will primarily address questions relating to contraception and
sexual health, although Orange intends to expand the service to other medical areas in the future.
Apart from operator-led initiatives, various organisations and individuals are rolling out app- and SMSbased m-Health initiatives across the region. During the Ramadan fasting period, the World Health
Organisation (WHO) and the International Telecommunication Union (ITU) collaborated to mRamadan as
part of their Be He@lthy Be Mobile programme to help people with diabetes to safely monitor their health
while fasting. In Kenya, the government is backing ZiDi, a mobile health management system designed to
improve the quality of maternal and child care by providing access to real-time data to enable effective and
Page 46
targeted health planning decisions over Microsoft's Windows OS platform. Although mobile operators are
not directly involved in the deployment of these solutions, they could still benefit from network usage,
especially for bandwidth-heavy solutions.
Mobile Insurance Meets A Need
The insurance market in Sub-Saharan Africa is grossly underdeveloped. There are a number of reasons for
this situation, notably ignorance and misconceptions, unaffordable premiums, and lack of access to
traditional insurance providers for many consumers, especially those in rural areas. This has created a
service gap in the insurance sector which the region's mobile network operators, in partnership with micro
insurance providers, are looking to fill. H213 and H114 saw a significant increase in the number of mobile
insurance (m-Insurance) roll outs across the region, a trend we expect to continue over the medium term
multi-country operators roll out the service in new markets and smaller players explore opportunities in that
market.
MTN, Safaricom and Airtel are among operators that rolled out new m-insurance services in H114. In April,
MTN partnered with the Nigerian National Health Insurance Scheme (NHIS) and mobile financial services
company Salt & Einstein MTS to offer a health insurance service, called Y'ello Health. According to
World Bank data, out-of-pocket health expenditure in Nigeria accounted for 95.7% of private expenditure
on health and 65.9% of total expenditure on health in 2012. This suggests there would be considerable
demand for an accessible and affordable health insurance programme. Furthermore, in early April the
Deputy Director of Authorization and Policy for Nigeria's National Insurance Commission stated that MTN
and Airtel had signed up 100,000 micro insurance subscribers a month since launching their services in
October 2013, demonstrating a strong appetite for mobile insurance services among Nigerian consumers.
In Kenya, Safaricom partnered with insurance companies Britam and Changamka to launch a health
insurance product in the country, specifically targeting the micro-insurance sector. For KES1,000 per
month, subscribers of the Linda Jamii health insurance product and their families are entitled to out-patient
benefits worth KES50,000 per year and inpatient benefits worth KES200,000 per year. Approximately
38.8mn Kenyans or 97% of the population lacks access to affordable and timely healthcare because they are
uninsured. In a low-tech, resource-limited environment such as Kenya, Safaricom's low-cost, flexible
scheme allows users to subscribe for the insurance policy via a mobile phone. Subscribers can pay for
premiums in instalments using the operator's MFS platform, M-Pesa.
Page 47
For its part, Airtel's Ghana subsidiary said it signed up more than 100,000 subscribers between January and
March 2014 after launching a partnership with UK-based insurance providers MicroEnsure and
Enterprise Life. Airtel Insurance provides Airtel subscribers with life, accidental permanent disability and
hospitalisation insurance. In July 2014, Airtel extended its m-Insurance service to Burkina Faso in
collaboration with MicroEnsure and German insurance firm Allianz. Subscribers can use the product for an
affordable premium of just XAF300 (USD0.62) per month.
VAS Key To Outperformance
The importance of an effective non-voice services strategy to African telecoms operators cannot be
overemphasised. BMI retains the view that operators with a rich and diversified portfolio of non-voice
services have a higher chance of long-term outperformance in view of the growing threat to revenue from
traditional services. As mobile data services take off in the region, on the back of falling tariffs and
availability of low-cost devices, this is a perfect time for operators to enhance their portfolio of non-voice
services. The table below highlights key VAS developments in the first half of 2014.
Table: Selected Regional VAS Developments, H114
Date
Jul-14
Jul-14
Country
Rwanda
South Africa
Operator
Details
Tigo
Tigo launched an on-demand service for learning English on a mobile phone. The
service, dubbed EduMe English, combines reading, listening and speech training
through text lessons, audio lessons and quizzes. Tigo also plans to launch the
service in Tanzania.
Emerge
Mobile
Emerge Mobile launched Edge mobile point of sales (MPOS) solution to be

delivered by iKhokha. The Edge device, which is an iOS- and Android-compatible
payment solution, will enable business owners to convert their smartphones into
point of sale (POS) terminals.
MTN
MTN launched the MTN Business Directory Services app. The app, which is built
on location-based positioning, helps formal and informal businesses to make easy
and quick connection with customers.
Jul-14
South Africa
Jul-14
Mozambique mCel
mCel launched Netgiro mobile internet packages, which also allow access
to Facebook, WhatsApp and Instagram.
Jun-14
Burkina Faso Airtel
Airtel launched the Airtel Mobil'Assur m-Insurance service in collaboration with

MicroEnsure and Allianz. Customers can subscribe to the service for XAF300
(USD0.62) a month.
Jun-14
Tanzania
Tigo
Tigo partnered with UK-based money transfer service WorldRemit to provide

digital money transfer services in Tanzania using Tigo Pesa mobile wallet.
Jun-14
South Africa
MTN
MTN and retailer Pick n Pay introduced a free money transfer service that will be
provided to consumers who register for a co-branded SIM card.
Moov
Etisalat-backed Moov partnered with Orabank to launch its MFS platform 'Flous',
which enables customers to use their mobile phones as digital wallets to pay for
bills, goods and services, and to transfer and receive money and manage bank
accounts.
Jun-14
Gabon
Page 48
Selected Regional VAS Developments, H114 - Continued
Date
Jun-14
Jun-14
Jun-14
Jun-14
Jun-14
Jun-14
Jun-14
Country
Nigeria
South Africa
Kenya
Ghana
Tanzania
Africa
Rwanda
May-14 Zimbabwe
May-14 Zambia
May-14 Rwanda
Apr-14
Uganda
Operator
Details
MTN
MTN and online price comparison firm PriceCheck announced plans to introduce
a co-branded app. The application allows MTN subscribers to use an online
directory to compare prices of goods and commodities.
MTN
MTN launched a service which allows its customers to subscribe to Simfy Africa's
Premium Plus streaming music service at a discounted price of ZAR49 (USD4.58)
per month, instead of the original price of ZAR60 per month. The Premium
Plus music service includes mobile and offline streaming.
iKaaz
iKaaz launched its MPOS solution. The NFC-and Bluetooth-powered cloud-based

solution enables consumers to make payments at select merchant outlets with
their mobile phones.
Tigo
Tigo entered a USD2mn agreement with the IFC and the MasterCard Foundation
to support and accelerate the growth of Tigo Cash and mobile financial services
across Ghana.
Airtel
Airtel, Tigo and Zantel announced plans to launch an interoperable platform for
their respective MFS services - Airtel Money, Tigo Pesa and EzyPesa - by the end
of June 2014 following an agreement to that effect.
Tigo
Online food ordering marketplace Hellofood partnered with Tigo to have its app
automatically pre-installed for free on majority of Tigo smartphones. Tigo
customers will receive exclusive Hellofood offers, such as discounts and free
delivery, through the service's notifications.
MTN
MTN partnered with Wikimedia Foundation to introduce free access to the

Wikipedia online encyclopaedia. MTN customers will get unlimited access to
Wikipedia free of charge on via MTN mobile internet (2G and 3G).
Telecel
Telecel rolled out video calling service for prepaid subscribers in the country. The
service can be used between video call-enabled handsets on the Telecel network
and enables subscribers to have face-to-face interactions on their smartphones.
Zamtel
Zamtel announced that it is in the process of securing a licence to offer mcommerce services, which it expects to launch by the end of 2014. The Bank of
Zambia also gave the operator permission to test the service internally among its
employees.
MTN
MTN and insurance firm Prime Life Assurance launched an m-insurance service
with emphasis on the lower market segment. MTN subscribers will be able to buy
policies for between RWF4,525 (USD7) and RWF21,625 per year, which make
them eligible for benefits of between RWF250,000 and RWF1.25mn.
Merck
German pharmaceutical company Merck KGaA launched an SMS diabetes

awareness campaign in partnership with the Ministry of Health, the Makerere
University and the Uganda Diabetes Association.
Apr-14
Nigeria
MTN
MTN partnered with the Nigerian National Health Insurance Scheme (NHIS) and
Salt & Einstein MTS to offer a health insurance service, called Y'ello Health. Y'ello
Health is a pre-paid service targeted at Nigerians who are unable to afford existing
health insurance plans.
Apr-14
Gabon
Libertis
Libertis launched its MFS platform in partnership with Union Gabonaise de

Banque (UGB).
Apr-14
Zimbabwe
Econet
Wireless
Econet Wireless partnered Western Union to allow people to send money from
abroad to account holders of the former's mobile money transfer platform,
EcoCash.
Apr-14
Tanzania
Tigo
Tigo offered subscribers a free access to Facebook on their mobile phones. The
service also includes the launch of Facebook in Swahili.
Nigeria
Teasy
International
Teasy Mobile Money deployed NFC payment service in partnership with VeriFone
Mobile Money, which integrates the mobile wallet, banking and telecoms provider
networks with POS stations.
Apr-14
Page 49
Date
Apr-14
Apr-14
Apr-14
Apr-14
Country
Ghana
Africa
Nigeria
Uganda
Operator
Details
Airtel
Airtel's MFS platform Airtel Money collaborated with Ghana Post to allow
subscribers access Airtel Money services, such as receiving and transferring
funds at Ghana Post's outlets nationwide.
MTN
MTN partnered Vivo Energy, the distributor of Shell products, to expand its
services to both of their customer bases in Africa. The partnership will be
launched in five markets initially: Botswana, Cote d'Ivoire, Ghana, Guinea and
Uganda.
Etisalat
Etisalat launched a new smartphone app to complement its existing m-commerce

platform. The smartphone app, which is available for free download on the
Android, iOS, Windows Mobile and Java platforms, offers improved usability
features such as quicker transaction processing as well as easy customer login on
multiple devices, independent of SIM cards. Etisalat is also expanding its
partnership network, with the addition of the Nigeria Inter-Bank Settlement
System (NIBBS) and Mastercard to improve merchant payment capabilities.
MTN
MTN launched a SIM-based service, dubbed ContactXchange, which allows MTN

subscribers in Uganda to choose and exchange contact information. The service
costs UGX200 (USD0.08) for use with local customers of MTN or another network
and UGX450 for use with international contacts.
Apr-14
Africa
Airtel
Airtel signed a pan-African agreement with Vivo Energy to provide extra Airtel
money agent points to people via Shell retail service stations in Africa. The
partnership was launched in Ghana, Uganda, Madagascar, Burkina Faso and
Kenya where both Vivo and Airtel overlap.
Apr-14
Nigeria
Glo
Globacom launched a new set of VAS, bringing the number of services on its
platform to more than 50.
Safaricom
Safricom partnered with insurance companies Britam and Changamka to launch a

health insurance product in Kenya, specifically targeting the micro-insurance
sector.
Econet
Wireless
Econet Wireless launched a mobile-based loan solution, named EcoCash Loans,

which allows users to access urgent loans of up to USD500 using their mobile
phones. Repayment of the loan is required within 30 days of securing on a one off
basis.
Orange
Orange partnered with the Cameroonian Ministry of Health to launch a mobile

health (m-health) service called My Healthline.
MTN
MTN partnered with PriceCheck to launch a mobile app for price comparison in
South Africa. The app will come preloaded on MTN's Steppa smartphone as well
as being available on iOS, Android and Windows Phone devices.
MTN
MTN partnered with Ecobank to expand MFS for MTN subscribers who are also
customers of Ecobank. The services allow subscribers to withdraw cash from
Ecobank ATMs and transfer money between Mobile money and Ecobank
accounts. The service will be available in Ghana, Cte d'Ivoire, Guinea, Congo
Brazzaville, Rwanda, Uganda, and Zambia.
Airtel
Airtel introduced a farmer's information system, dubbed Airtel Kilimo, to provide

real-time information to farmers over its mobile network. The project provides
access to agricultural information, research and advice, with focus on farmers
cultivating bananas, maize, rice, beans and mango. Airtel Kilimo will also provide
weather updates and marketing pricing information.
iKaaz
Ikaaz launched its NFC payment solution. The cloud-based solution will facilitate
payments at select merchant outlets by the tapping of featured phones. iKaaz has
collaborated with First City Monument Bank in Nigeria to offer the service.
UTL
UTL re-launched its Voice SMS service. The service enables subscribers to send
messages by voice, thus eliminating the need to type. The Voice SMS service is
accessible via both smartphones and feature phones.
Apr-14
Apr-14
Kenya
Zimbabwe
Mar-14 Cameroon
Mar-14 South Africa
Mar-14 Africa
Mar-14 Kenya
Feb-14 Nigeria
Feb-14 Uganda
Page 50
Date
Country
Feb-14 Namibia
Jan-14
Zimbabwe
Operator
Details
MTC
MTC Namibia collaborated with MobiPay to an MFS platform called MTC Money.
The service enables subscribers to perform money transfers, withdrawals and
deposits.
Telecel
Telecel launched Telecash, enabling subscribers to transfer money to any mobile

phone regardless of network, including international cash transfers. The operator
fixed the spending limit for transactions at USD5,000 a month, USD1,000 a day
and USD500 for each transaction.
Source: BMI
Wireline
Key Developments
In August 2014, Wananchi Group's subsidiary iSAT signed a new multi-year deal with UK-based
satellite broadband provider Avanti Communications to offer satellite broadband services across
Tanzania and Kenya. Under the deal, Avanti Communications' HYLAS 2 satellite will be used to provide
the service, targeting consumer and enterprise customers. The rapidly deployable and scalable satellite
broadband solution will be based on the Ka-band technology.
In August 2014, Wananchi, which operates the Zuku brand, announced plans to launch a KES220mn
(USD2.5mn) network upgrade aimed at improving transmission speeds and reduce downtime on its
network. The network upgrade work is expected to be completed by the end of October. Once completed,
Zuku will deliver its Nairobi subscribers broadband speeds of up to 50Mbps, with similar speeds already
being offered in Mombasa.
In July 2014, Zuku implemented a project to boost its voice telephony service capacity. The project
included the integration of a delivery platform, dubbed Soft Switch system, to provide a wide range of
voice telephony services. The upgrade, which is expected to support full voice telephony provision for
Zuku triple-play subscribers, was completed at the end of July.
Kenya's ICT ministry announced that the second phase of the National Optical Fibre Backbone
Infrastructure (NOFBI) project, which commenced in July 2014, involves the deployment of an
additional 1,600km of fibre-optic backbone infrastructure to link all 47 counties in the country. The
project is funded through a USD72.5mn loan from EXIM Bank of China while Chinese equipment
vendor Huawei Technologies is the main contractor. The NOFBI phase 2 project will complement the
first phase of the fibre optic backbone project, which links 28 counties through 4,300km network. The
NOFBI phase 1 project was built by a consortium that included Huawei, ZTE and Sagem, and has been
in operation since 2009.
In May 2014, Telkom Kenya (Orange) connected Marsabit, Nandi, Vihiga and Lamu counties in Kenya
to its Broadband Virtual Private Network (BVPN) solution. The deployment has raised the total number
of counties now connected to Orange's BVPN to 31. In April the firm connected 27 governors' offices
and county assemblies to its network in order to deliver key ICT services, providing customised end-toend solutions for the firm's clients in all sectors across Kenya.
Page 51
Fixed-Line
Kenya Fixed-Line Subscriptions By

Technology
The total number of fixed-line (fixed wireline and
2011 - 2014
fixed wireless) connections in Kenya at the end of

March 2014 was 204,354, according to data
published by the Communications Authority of
Kenya (CAK). This was a decline of 0.7% quarteron-quarter (q-o-q) and 7.7% year-on-year (y-o-y)
from 2015,856 in Q413 and 221,287 a year earlier.
The regulator notes vandalism of copper cables and
substitution to mobile telephony are two reasons
behind the decline of fixed-line connections. Kenya's
fixed-line subscriber base peaked at 696,500 at the
end of June 2009.
Although the number of fixed-line subscriptions
Source: BMI, CAK
continues to trend downwards, the rate of decline

appears to be slowing. This is in line with our view
that the introduction of multi-play services which offer fixed-line connections in attractive bundles with
broadband and/or TV services, as well as network investment by key players, would sustain demand for
fixed-line services. Wananchi's Zuku implemented a project to boost its voice telephony service capacity in
July 2014. The network upgrade is expected to support full voice telephony provision for Zuku triple-play
subscribers. In November 2013, mobile market leader Safaricom and fixed data services provider Liquid
Telecom Kenya announced plans to launch IPTV and high-speed bundled internet services to residential
customers. The two services are expected to go live in 2014.
Another potential growth area is the corporate services segment, which is set to benefit from the positive
business outlook in the country and network infrastructure development. In July 2013, Safaricom
announced plans to offer fixed voice services, data connectivity and managed network services to
businesses in the country as part of its enterprise solutions portfolio. The managed network services will
include cloud-based applications such as ERP solutions and hosted payroll and accounting packages.
Safaricom has awarded contracts to Huawei and Ericsson to build a 600km fibre-optic network in Nairobi,
which will ultimately be connected to buildings, as part of the strategy. Safaricom plans to spend KES10bn
(USD11mn) on the fibre project.
Page 52
The CAK provides a breakdown for fixed-line connections by technology. According to the regulator, the
decline in fixed-line connections was driven by both the fixed-wireless and fixed terrestrial segments. The
number of fixed-wireless connections peaked at 448,529 in Q209, equivalent to 64.4% of the total fixed-line
market. By the end of Q114, the fixed-wireless and fixed terrestrial segments had 148,251 and 56,103
connections respectively. This meant that the proportion of fixed-wireless connections had increased to
72.5% by the end of Q114.
The fixed-wireless segment contracted in the 12 months to the end of March 2014, declining by 8.2% to
148,251. The relatively large y-o-y decline of fixed-wireless connections masks the marginal quarterly
decline of 0.4% in Q114, compared to 13.1% in Q113. We attribute the slowdown in the rate of fixedwireless line disconnections to Telkom Kenya (Orange)'s efforts to revive its operations in that sector. In
October 2013, incumbent introduced a wireless fixed voice service targeting homes and small offices. The
service, called Home Talk, is provided through a plug-and-play desktop phone and enables subscribers to
acquire numbers similar to a traditional landline. The service, costing KES4,500 (USD53), will be available
in Nairobi, Mombasa, Kisumu and Eldoret. According to the plan, Home Talk subscribers will be provided
with mobile rates of KES2 (USD0.02) on-net and KES3 (USD0.03) off-net by purchasing monthly bundles
at KES750 (USD8.83). The operator also launched a postpaid fixed voice service by end-2013.
Orange publishes market data for its Kenyan wireline business, although these often differ from those
published by the regulator. At the end of December 2013 (latest data), Orange revealed that it had 168,000
fixed-line subscribers, down from 181,000 in the previous quarter and from 207,000 a year earlier.
According to Orange, these customers include copper and FTTH. Orange's figure was far in excess of what
the CAK gives as the wireline total, leading us to suspect that the operator included fixed-wireless
connections. Despite the previous disparity between the figures released by the operator and those published
by the CAK, BMI notes that both sets of data reflect a downward trend in fixed-line subscriptions.
Page 53
BMI expects Telkom's fixed-line services to remain

in a downwards trend over the medium term,
Orange Fixed-Line Subscribers

2010-2014
especially as the company shifts its focus towards

high-value data services in a bid to drive revenue
growth. Telkom has been unable to take advantage
of its fixed network infrastructure to develop
converged high-value solutions for consumers and
businesses. The company's underperformance in this
sector is staggering when considered against the
relatively strong performance of alternative fixedline operators such as Wananchi and AccessKenya,
which are rolling out multi-play services and
investing into the lucrative corporate market with
cloud-based solutions. According to operational data
published by Orange, Telkom's fixed-line subscriber
base fell by 39.6% in the two years to
Source: Orange, BMI
December 2013 to reach 168,000 subscribers. The

company's fixed internet subscriber base grew from 4,000 to 5,000 in the year ending 2013. It fell by a
further 6% q-o-q in Q114 to 158,000 lines.
Meanwhile, we expect traditional fixed-line services to come under increasing pressure from VoIP services
in the future. In October 2013, Liquid Telecom Kenya (formerly Kenya Data Networks) announced plans to
launch its VoIP fixed service in 2014. The operator will offer its voice service via the internet, with free onnet calls. The operator, which is investing USD5mn in the launch, is targeting around 5,000 to 10,000
homes with the bundled services, according to Liquid Telecom Kenya CEO, Shahab Meshki. The service
will be offered with an internet subscription and call charges to other networks will be announced at the
launch. The operator will also offer music, education and sports content on demand as part of the bundled
packages.
MTN Kenya, which serves the corporate market, offers voice services to fixed and mobile internet users
via the VoIP technology. The service enables customers to make and receive calls on desktop and portable
computers, fixed-line telephone connections and mobile handsets. Free calls will be available over its own
dedicated IP network. BMI expects MTN's move to intensify competition in the market for voice services
as MTN's ability to leverage its data network's low-cost voice traffic routing capabilities will allow it to
Page 54
significantly undercut its rivals in terms of pricing. In particular, BMI believes that the new service will
have great appeal for Kenya's cost-conscious business telecoms users.
Broadband
Growth in Kenya's broadband market is driven by a combination of the government's comprehensive ICT
strategy and network investments by private service providers. In July 2013, the Kenyan government
launched a KHS257bn (USD2.89bn) National Broadband Strategy (NBS) to extend affordable internet
access to all Kenyans by 2017. Broadly, Kenya's NBS includes laying down 30,000km of fibre-optic cable
reaching at least 80% of districts by 2017. With this infrastructure the government aims to provide universal
and affordable access to 5Mbps broadband connections in rural areas and 40Mbps connections in urban
areas. Other major goals are for 75% of businesses to have an online presence, 70% of all government
transactions to be virtual, 40% of Kenyans to be digitally literate and 20% of Kenyan websites to be in local
languages.
Table: Internet Subscriptions By Technology
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
9,406,843
9,589,851
12,340,005
11,580,065
13,090,348
13,257,309
23,814
24,011
21,282
17,169
16,429
16,540
684
727
1,278
749
682
700
DSL
10,807
10,390
11,512
11,537
12,014
12,547
Fibre-Optic
54,400
55,007
58,197
61,739
67,470
69,377
25
25
25
25
25
25
9,496,573
9,680,011
12,432,299
11,671,284
13,186,968
13,356,415
Mobile
Terrestrial Wireless
Satellite
Cable Modem
Total Internet Subscriptions
Source: BMI, CAK
Page 55
Market Data
Kenya Internet Users & Internet

Penetration (%)
2012-2013
Data from the Communications Commission of

Kenya (CCK) show that there were 13.356mn
internet subscriptions in Kenya at the end of March
2014, an increase of 1.3% q-o-q. This was the
second consecutive quarterly increase in internet
subscriptions after unexpected net losses in Q313.
Growth in Q114 was driven by subscription gains in
the mobile segment, while fibre-optic connections,
with net additions of nearly 2,000 lines during the
quarter, recorded the fastest growth in the fixed
broadband segment.
The regulator also estimated the number of internet
Source: CCK, BMI
users in the country at the end of March 2014 to be

around 21.679mn, up 1.9% q-o-q on the back of the
jump in the number of internet subscriptions. The
CAK also reported that there were 1.448mn broadband subscriptions in the country at the end of March
2014, compared to 1.435mn in the previous quarter and 1.022mn a year earlier.
However, the regulator defines broadband subscriptions as connections with speeds of 256kb or more.
Furthermore, it appears that the regulator's data includes high-speed mobile data subscriptions via
smartphones. BMI's mobile broadband subscriptions calculation only includes wireless data subscriptions
via dedicated data cards and USB dongles, as well as connections with transmission speeds of 1Mbs or
more. Therefore, our estimate for the size Kenya's broadband market is based on the number of fixed
broadband subscriptions and a percentage of 3G data subscriptions which we believe is representative of the
proportion of users of dedicated data cards and USB internet dongles. According to the CAK's data, the
total number of non-mobile internet subscriptions in Kenya was 99,189 at the end of March 2014, compared
to 90,160 a year earlier. The majority of these connections are based on broadband technologies, including
fibre-optic network services.
Page 56
Table: Fixed/Fixed Wireless Broadband Market
Name of operator
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Market
Share (%)
Wananchi Telecom
31,955
36,072
39,207
44,254
44,254
44.7
Liquid Telecom* (formerly KDN)
21,377
19,937
15,290
16,400
17,600
17.8
AccessKenya
11,600
11,411
11,502
11,360
11,360
11.5
Telkom Kenya
10,390
10,718
10,718
11,279
11,524
11.6
Safaricom
6,456
7,100
7,155
6,999
7,020
7.1
iWay Africa
2,502
2,731
2,731
2,121
1,923
1.9
Jamii Telecon
1,900
1,900
1,900
2,324
2,574
2.6
Mobile Telephony Networks
994
1,144
1,205
1,363
1,372
1.4
Call Key Networks
596
587
590
534
547
0.6
Tangerine Limited
260
261
280
0.3
1,190
703
714
835
652
0.7
Others
Source: BMI, CAK
International Connectivity
At the end of Q114, the amount of bandwidth available in the country was 865,714Mbps, compared to
862,474Mbps in the previous quarter. The increase was due to a 0.9% q-o-q capacity expansion on the
SEACOM submarine cable network, which offset decreases of 1.6% q-o-q and 15.3% q-o-q on the EASSy
submarine cable and satellite connectivity respectively.
The growth of international bandwidth capacity supported an increase in the volume of used bandwidth
during the same period. Other factors boosting data usage growth are greater internet literacy among
citizens and affordability of access devices, including smartphones and tablets. According to the CAK, the
volume of international bandwidth used in the three months to March 2014 was 447,061Mbps, an increase
of 22.3% q-o-q and 45.3% y-o-y.
Kenya's main source of international bandwidth is from submarine cable systems, four of which are active
in the country. The first and biggest system called SEACOM was launched in July 2009. This was followed
by the launch of The East African Marine Systems (TEAMS) and the East Africa Submarine System
(EASSy). The smallest submarine cable system is the LION 2, which was launched in April 2012 by a
Page 57
Telkom Kenya-led consortium. These developments have brought down subscription rates for broadband
services to more affordable levels and catalysed dramatic increases in international bandwidth usage by
Kenya. BMI believes that competition between the cable systems has helped to drive prices down and lead
to increased uptake. However, a major loser has been satellite providers, which, due to their relative
expense, have lost traffic to the undersea cable systems.
Pay-TV
In November 2013, mobile market leader Safaricom and fixed data services provider Liquid Telecom
Kenya announced plans to launch IPTV and high-speed bundled internet services to residential customers.
The two services are expected to go live in 2014. According to Safaricom's CEO, Bob Collymore, the
operator's IPTV platform will be available on multiple devices, including TVs, tablets and handsets, and
will offer advanced features such as video-on-demand. Safaricom's pay-TV initiatives underscore its service
diversification strategy amid intense competition in the voice and data segments of the telecoms market.
The operator is keen to take advantage of revenue growth opportunities from non-voice services for
residential and corporate customers following the strong performance of that segment in recent years. The
company reported a 30% y-o-y growth in non-voice service revenues to KES24.3bn (USD276mn) in the six
months to September 2013, equivalent to 35.1% of total revenues for that period.
For its part, Liquid intends to offer a mix of free and premium channels, possibly in partnership with the
dominant pay-TV service provider DSTv. This latest move highlights Liquid's renewed focus on the
residential market. The company had pulled out of the residential market in 2011 to concentrate on the
lucrative corporate market. However, the new strategy appears to be driven by Liquid Telecom Group,
which acquired Kenya Data Networks (KDN) in 2013.
Kenya's pay-TV market is dominated by South Africa's DSTv. However cable operator Wananchi, which
operates under the Zuku brand, is gaining ground with its multi-play offerings. Alternative operator
Wananchi launched triple-play services over cable in 2009 and over a fibre-optic network in December
2010. BMI believes that the arrival of Liquid and Safaricom will boost competition in the market and drive
growth and innovation. We expect the operators to invest heavily in content development while service
subscription rates are likely to trend downwards.
However, only a small proportion of residential customers are set to benefit from these services, especially
those offered over fixed network infrastructure. BMI notes that high speed fixed data networks mostly
cover highbrow neighbourhoods in major cities, leaving the majority of the population that live in rural
areas without access to fixed-line pay-TV services. Furthermore, the underlying reason for operators'
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service diversification is revenue growth. This would inevitably shift their focus towards high-end
consumers in major cities who are more likely to pay a premium for TV services. That said, DSTv already
has a mobile service in Kenya while Safaricom intends to make its service compatible with various mobile
devices such as tablets and handsets. This would allow the companies to offer services to customers in other
geographic regions and with lower income brackets.
WiMAX
Safaricom is one of the biggest WiMAX operators in Kenya. In August 2008 it purchased a 51% stake in
local ISP One Communication (OneCom) for USD2.6mn. The acquisition offers Safaricom the
technology and platform to deliver a wider range of services including WiMAX access. OneCom installed
five WiMAX base stations in Nairobi and plans to launch services to small towns in rural areas. In
September 2010 Safaricom completed the acquisition of two data service providers, IGO Wireless and
Instaconnect. IGO Wireless is a fixed WiMAX network operator, while Instaconnect integrates data
solutions for clients. The companies are under a single management operating on the outskirts of Nairobi's
central business district. Safaricom now owns three out of the eight WiMAX operators in the country. By
the end of March 2014, Safaricom had around 203 WiMAX base stations in the country.
Table: Selected Wireline Developments
Date
Details
Apr-14
Orange has confirmed plans it wishes to exit its Telkom Kenya subsidiary, and will look to find a buyer for its
mobile, fixed and broadband assets.
Mobile market leader Safaricom and fixed data services provider Liquid Telecom Kenya announced plans to
launch IPTV and high-speed bundled internet services to residential customers. The two services are expected
Nov-13 to go live in 2014.
Kenya Data Networks (KDN) was rebranded as Liquid Telecom Kenya, following the acquisition of an 80%
stake in its previous owner Altech by Liquid Telecom Group, a subsidiary of South Africa-based Econet
Sep-13 Wireless Group.
Jul-13
Safaricom announced plans offer fixed voice services, data connectivity and managed network services to
businesses in the country as part of its enterprise solutions portfolio. The managed network services will
include cloud-based applications such as ERP solutions and hosted payroll and accounting packages.
Safaricom has awarded contracts to Huawei and Ericsson to build a 600km fibre-optic network in Nairobi,
which will ultimately be connected to buildings, as part of the strategy. Safaricom plans to spend KES10bn
(USD11mn) on the fibre project.
Jul-13
AccessKenya announced plans to extend its fibre and wireless networks to all 47 of Kenya's counties by 2014.
The internet and cloud computing service provider intends to invest KES35mn (USD0.4mn) on network roll-outs
before the end of 2013, extending coverage to Kisii, Embu, Isiolo, Murang'a, Nyahururu, Bungoma, Kitale, Busia
and Malindi, and has also begun building a further 400km of fibre in Nairobi and Mombasa.
Jul-13
The Ministry of Information, Communication and Technology extended its ongoing agreement with Telkom
Kenya to manage the National Optic Fibre Backbone Infrastructure (NOFBI). The agreement's renewal is
effective from March and is valid for three years.
Safaricom announced plans to build its own terrestrial fibre-optic network, estimated to cost up to KES4.8bn
Nov-11 (USD50.4mn). The 4,000km network will be the second biggest inland network after the government's 5,000km
Page 59
Selected Wireline Developments - Continued
Date
Details
National Optic Fibre Backbone Infrastructure (NOFBI) and it is expected to connect to international submarine
cables, with landing points on Kenya's shores.
Telkom Kenya launched FTTH broadband services in two of Nairobi's most affluent suburbs, Muthaiga and
Mar-11 Parklands. Transmission speeds of up to 8Mbps are available to subscribers.
Safaricom selected solutions provider Alepo Technologies to enhance its WiMAX network in the country. Alepo
will provide an integrated business support system (BSS) and open-source software (OSS) solution for the
operator's WiMAX network. According to the terms of the deal, Alepo will also integrate the operator's existing
Mar-11 customer relationship management (CRM) system.
Jan-11
Hong Kong-based PCCW Global Limited and Kenya Data Networks (KDN) successfully conducted the first
High-Definition Video Conferencing (HDVC) connecting Kenya with North America, Europe and Asia. KDN
signed a Multiprotocol Label Switching (MPLS) Inter-Carrier Interconnection agreement with PCCW Global in
July 2010 with a view to gaining access to PCCW Global's MPLS VPN network. The link-up is the first HDVC
live demonstration connecting Kenya to multiple destinations outside of Africa and now extends KDN's
international coverage to more than 110 countries and more than 1,500 cities globally.
Jan-11
Jamii Telecoms Limited (JTL) signed a KES1.2bn (USD14.2mn) deal with Chinese equipment manufacturer ZTE
to deploy fibre-optic cables to 100,000 homes in Kenya, reported local newspaper Business Daily.
Jan-11
KDN expanded its network services to six countries across Sub-Saharan Africa using equipment supplied
by Strix Systems. KDN uses Strix Systems' Indoor Wireless Systems, Edge Wireless System and Access
Network Outdoor Wireless Systems to enhance its presence, performance and mobility, and to provide services
in Malawi, Gabon, Rwanda, Tanzania, Uganda and the Democratic Republic of Congo. KDN utilised Strix
Systems' mesh networking system to launch its Butterfly Wi-Fi/wireless service in 2006.
Oct-10
AccessKenya increased its WiMAX network so that it will cover the Kenyan towns of Nanyuki, Nyeri and
Mukurwe-ini. New sections of the network include Layer 2 and Layer 3 Virtual Private Networks, MPLS and
inter-branch connectivity.
Orange joined the Lion 2 cable consortium in an agreement to build a submarine cable in the Indian Ocean
which will extend to Kenya, through the island of Mayotte. The cable will be 3,000km long and will extend the
existing network to the east African country, providing Mayotte with access to the broadband network for the
Sep-10 first time.
AccessKenya initiated deployment of its fibre-optic network infrastructure in Mombasa. The deployment is part
of the firm's intentions to deploy the largest IP-based fibre-optic network infrastructure in the country.
AccessKenya awarded the contract for the deployment of the network to Enterprise Gnrale Malta
Forrest (EGMF). EGMF will be responsible for supervising the digging work and also for laying of the physical
Sep-10 cable infrastructure.
Wananchi entered into a contract with Cisco to deploy end-to-end network technology solutions. The contract
will facilitate the Kenyan operator to provide triple-play services across nine countries in East Africa: Kenya,
Uganda, Tanzania, Rwanda, Burundi, Malawi, Ethiopia, Sudan and Zambia. East Africa Capital Partners and
Aug-10 Cisco Capital, a wholly owned subsidiary of Cisco, backed the contract.
Apr-10
Access Kenya launched its new Metropolitan fibre-optic cable, covering 140km in Nairobi's central business
district and some wealthy residential areas of the capital.
Safaricom had agreed to a deal with Kenya Power and Lighting Company (KPLC) to lease fibre-optic cable
capacity across its national network. According to the deal Safaricom will operate a fibre-optic pair on KPLC's
1,500km Optical Ground Wire (OPGW) system, as built across the national power grid. KPLC also agreed
Feb-10 parallel deals with Wananchi Group and JTL.
KDN started the deployment of its second fibre-optic cable in the country. The 700km-long cable running
between Thika and Mombasa created an alternative for the operator's existing network between Nairobi and
Nov-09 Mombasa.
Oct-09
Israel-based WiMAX vendor Alvarion won a three-year turnkey contract from Kenyan mobile operator
Safaricom. Alvarion was responsible for deploying a WiMAX network using its 'BreezeMAX' solution in the
3.5GHz frequency band.
Jul-09
On Thursday July 23 2009, the SEACOM cable system was finally switched on, bringing much-needed
international bandwidth to East Africa. This ended the region's time as the last major inhabited stretch of
coastline unconnected to the global broadband network. The project, owned by a conglomerate of mostly
Page 60
Selected Wireline Developments - Continued
Date
Details
African investors, went live, only slightly behind schedule, and now connects Kenya, Tanzania, Mozambique
and South Africa to Europe and India, not to mention the information superhighway.
Jul-09
Wananchi signed an agreement with Kenya Power and Lighting Company (KPLC) to use its power transmission
system to build a fibre-optic network. The agreement gave Wananchi a wider national reach and access to
KPLC's more than a million-strong customer base.
Jun-09
KDN signed a contract with Alcatel-Lucent for an upgrade of its IP/MPLS network across Kenya and
neighbouring countries in East Africa. The three-year contract to supply, integrate, install and deploy advanced
optical networking and optical switching solutions for KDN is valued at KES1.6bn (USD21.4mn).
Source: BMI
Page 61
Industry Trends And Developments
In August 2014, Liquid Telecom Group selected local IT services provider Techno Brain to establish a
call centre for its subscribers. The call centre will be based at Liquid Telecom's Nairobi office, according
to Chief Commercial Officer Paul Statham. Earlier, the operator was dependent on its technical staff to
receive subscribers' complaints. The deal will free up Liquid Telecom's technicians to concentrate more
on resolving technical issues. Under the contract, Techno Brain will supply the equipment for the call
centre, train employees and manage it for a fee and transfer it to Liquid Telecom.
In July 2014, a parliamentary panel tasked with examining the surveillance tender reportedly worth
KES45.3bn (USD520mn) awarded to local telecoms operator Safaricom recommended the deal go ahead.
Safaricom initially secured the deal earlier in 2014. However, the project was put on hold by the Kenyan
parliament, pending inquiries into whether due processes were followed concerning the tender award.
The government has expressed the urgency of setting up the surveillance system, which is aimed at
offering protection against terror attacks by using 1,800 ultra-high definition CCTV cameras and 80
enterprise eLTE base stations in Mombasa and Nairobi.
In July 2014, Safaricom and Kenya Commercial Bank (KCB) entered a strategic partnership and
launched a one-stop integrated solution to provide services to small and medium enterprises (SMEs) in
Kenya. Biashara Smart comprises communications and financing products, capacity building initiatives
and reward programmes to provide SMEs with a credible and efficient way of doing business. To access
the products, users are required to dial *484# and choose the desired product, which includes loans,
accounts, mobile interest banking, cards, early invoice payment, Zidisha Biashara and Lipa Na M-Pesa.
The partnership is targeting 1mn SMEs over one year.
In June 2014, Liquid Telecom completed the roll out of its East Africa Fibre Ring that connects Kenya,
Uganda, Rwanda and Tanzania. The first fully redundant regional fibre ring will connect these countries
to each other and the rest of the world. The ring is part of the operator's pan-African fibre network,
reported to be the largest single fibre network on the continent. The ring will enhance the Internet
resilience with earlier unavailable routing options by ensuring Liquid Telecom subscribers will not be
impacted by fibre cuts. In case of a fibre cut, internet traffic is automatically rerouted around the ring,
offering consistent high speeds and continuous uptime for users.
Wananchi Group plans to expand its Zuku TV's residential fibre services to Mombasa. The service
provider has already initiated construction in Mombasa and plans to cover about 100,000 homes in the
city during 2014. The operator also plans to invest between KES4.3bn (USD49.24mn) and KES8.7bn to
expand its cable services in Uganda and Tanzania in 2014.
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Regulatory Development
Table: Kenya: Regulatory Bodies And Their Responsibilities
Regulatory Body
Responsibilities
Communications Authority of The Communications Commission of Kenya (CCK) was established in February 1999 by
Kenya (CAK)
the Kenya Communications Act, 1998, to license and regulate telecommunications, radio
communication and postal services in Kenya. The CCK was renamed the Communications
Authority of Kenya (CAK) in 2014 following the enactment of the Kenya Information and
Communication Amendment (KICA) Bill 2013.
Waiyaki Way
It holds the following functions:
PO Box 14448,
00800WestlandsNairobi,
Kenya
Tel: +254-20-4242000Tel:
+254-20-2441081-4Web:
www.ca.go.ke
Licensing (telecoms and postal/courier) operators;

Regulating retail and wholesale tariffs for communication services;
Managing competition within the sector to ensure a level playing ground for all
operators;
Type-approving communications equipment;
Managing the radio frequency spectrum and numbering resources;
Monitoring the activities of licensees to enforce compliance with the license terms and
conditions as well as the law; and
Implementing universal service obligation for both postal and telecommunication
services.
Information &
The Kenya ICT Authority was inaugurated in January 2014, following the amalgamation of
Communication Technology the Kenya ICT Board, Directorate of eGovernment and Government Information
Authority Kenya (ICT Kenya) Technology Services (GITS), consolidating all IT functions under the Ministry of ICT. Its
mission is to champion and actively enable Kenya to adopt and exploit ICTs through
promotion of partnerships, investments and infrastructure growth for socio-economic
enrichment.
Telposta Towers, 12th Floor,
Koinange Lane
Its objectives are:
P.O. Box 27150
Nairobi, 00100, Kenya
1. Develop, launch and sustain a globally compelling brand marketing campaign for Kenya
ICT
2. To develop and promote competitive ICT industries in Kenya
3. To develop world-class Kenyan ICT institutions
4. To increase ICT access, utilisation for all Kenyans (become a principle driver in bridging
the digital divide)
Tel: +254-020-221960
Web: http://www.ict.go.ke
It launched a revised ICT MasterPlan 2017 in April 2014, which identifies three key projects
to develop; the National Digital Registry Services, a Citizen Service Portal and Government
Shared Services.
Source: BMI
In January 2014, Kenya's parliament passed and assented into law the Kenya Information and
Communication Amendment (KICA) Bill 2013, which seeks to replace the existing telecoms regulator, the
Communications Commission of Kenya (CCK), with a new with greater independence from political and
Page 63
commercial influence. The act changed the name of the regulator to the Communications Authority of
Kenya and reconstituted the board of the regulator within 90 days of coming into force.
According to the act, the president will appoint the chairperson of the board, while the cabinet secretary for
information and communication will appoint seven directors. The principal secretaries in the Ministry of
ICT and the Treasury will also be members of the board. The term of office of the members of the board
appointed shall be three years, renewable for another three years. In addition to telecoms market regulation,
the authority will also establish a Broadcasting Standards Committee which will be responsible for
administering the broadcasting content aspect, formulating media standards, and regulating and monitoring
compliance with those standards.
ICT MasterPlan 2017
The ICT Authority Kenya launched a revised plan for the development of the ICT sector in April 2014. The
following outcomes are expected by 2017:
8% ICT contribution to GDP;
Creation of 180,000 direct jobs;
37 successfully commercialised ICT applications with at least two transformative;
55 ICT companies established two of which will have a customer base of over 5 million;
Improved global competitiveness by moving up 15 points on GII, e-Government and NRI ranking;
Recognition of Kenya as a regional ICT hub;
Increased public value of e-Government services with 50% of adults accessing at least one e-Government
service; and
ICT is classified as a standalone economic sector by 2016.
Competition
In October 2006, the Kenyan government selected a consortium headed by Dubai-based group Vtel
Holdings to be the country's second national operator (SNO). The move by the government was meant to
bring competition to Kenya's fixed telephony market as well as increased competition to the mobile
telephony and data services markets. Vtel agreed to pay KES12.1bn (USD169.7mn) for the licence, which
was designed to allow it to offer fixed-line, wireless and data services. Two other companies entered bids
but failed to match the price offered by Vtel; Reliance of India offered KES8bn (USD111mn) while
MTNL, also of India, offered KES3.8bn (USD52.1mn).
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In January 2007, it was reported that the CCK had cancelled the Vtel consortium's winning bid, following
its failure to resolve a series of shareholder disputes. The Dubai-based group has been attempting to find
new local investors after its original partners were unable to secure their share of the funding, according to
media reports. Although the CCK offered the concession to the second-placed bidder, the consortium led by
Reliance, it was subsequently revealed that Reliance had decided not to apply for the concession. In March
2007, the CCK announced that it would be forced to re-run the auction for the country's SNO licence.
Despite this, the auction was subsequently cancelled.
Although the attempt to license a second national operator was unsuccessful, the Kenyan authorities have
made greater headway with the introduction of local competition in the fixed telephony market. In 2005, the
government licensed Flashcom and Popote Wireless to operate in the local loop as providers of fixedwireless telecommunications services. In addition to fixed telephony, both operators offer internet and data
services to business and residential customers. Although Flashcom and Popote were initially able to expand
their share of the fixed-line market at Telkom Kenya's expense, it is understood that the launch of fixedwireless services by the latter has blunted the impact of competition in the local loop market.
In contrast to the fixed telephony market, which has only a handful of operators and which continues to be
dominated by Telkom Kenya, there exists a much larger number of players in the internet access and data
services sectors. By the end of 2008, the Kenyan telecoms regulator had issued 127 licences to internet
service providers (ISPs). Of these, 50 were said to be operational.
Safaricom is the dominant operator in the Kenyan mobile market. The CCK is tasked with improving levels
of competition, but this has proved difficult with such a dominant operator.
Licensing
The CCK issues telecommunications licences to network operators and other service providers.Applicants
must meet the following basic requirements:
Applicant must be a registered entity in Kenya. The applicant is required to have a duly registered office,
permanent premises and office premises.
To promote fair competition and boost local ownership, it is conditional for the company to have 20% of
its shares owned by Kenyan citizens.
To maintain and promote high standards in the telecommunications industry, applicants are required to
have a qualified and competent workforce.
Applications should be made through the relevant application forms.
Each application shall be accompanied by the prevailing non-refundable application fee.
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Applications are subjected to a 60-day gazette notice followed by a CCK Board approval.
Successful applicants shall pay the appropriate initial licence fee.
The company must give two different and independent referees.
The commission has now adopted a unified licensing structure, which is technology neutral. There are now
only three different types of telecoms licence. A network facilities provider (NFP) is licensed to provide
telecoms infrastructure, using any type of technology. An applications service provider is licensed to
provide any type of service to an end-user over the facilities of an NFP. A content service provider is
licensed to provide content services material, information services and data processing services to endusers. Any company can be licensed as all three.
CAK Revises YuMobile Sale Conditions
In August 2014, the CAK revised the conditions for telecoms operators Safaricom and Airtel's planned
acquisition of Essar Telecom Kenya (yuMobile), allowing the parties to go ahead and conclude the
transaction. The deal involves Safaricom taking over yuMobile's existing spectrum, infrastructure and
employees and Airtel acquiring the firm's 2.7mn mobile subscribers. CAK withdrew at least four of the 13
terms set to the parties before approval of the deal, according to CAK Director General Francis Wangusi.
The four conditions relate to infrastructure sharing. CAK reached the decision after Airtel, Safaricom and
yuMobile filed a petition to detach general regulatory issues from the proposed transaction.
CAK To Implement Pay-TV Content Sharing Rules
The CAK is set to implement content sharing regulations that will force pay-TV operators to resell
exclusive content to competitors. The move is aimed at preventing a monopolistic scenario that has seen
operators such as DStv having an undue advantage over their counterparts. The regulator intends to come up
with regulations that will require all pay television service providers to share premium content on a
commercial basis, according to CAK Director General Francis Wangusi. The regulations are expected to be
implemented by October 2014.
CAK Renews Safaricom's Licence
In June 2014, the CAK renewed Safaricom's licence for next ten years. The renewal of the licence, which
expired in June, generated much controversy, with the watchdog's figures indicating that the operator was
missing certain quality of service (QoS) goals. Safaricom rejected these claims. Safaricom paid a KSh2.3bn
(USD26mn) fee to get the licence renewed.
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CAK To Enforce Mobile Infrastructure Sharing
The CAK will enforce infrastructure sharing among mobile operators by September 2014. The regulator has
outlined guidelines that will require all mobile service providers having excess capacity to share the
infrastructure on a commercial basis with other operators, according to Director General Francis Wangusi.
The authority seeks to penalise those who fail to comply with the guidelines. Wangusi claims that the
decision is aimed at cutting down investments costs in the sector. The move comes as regulator licensed
three mobile virtual network operators, to be hosted by Airtel Kenya.
CAK Contracts Rohde & Schwarz
In August 2014, the CAK commissioned Electronics group Rohde & Schwarz to implement a spectrum
management and monitoring system (SMMS). The platform, which consists of mobile and stationary
components, will help the CAK regulate the radio spectrum to ensure interference-free reception of services
such as radio, TV and wireless communications. Rohde & Schwarz will also provide training and
maintenance services. The nationwide system will be delivered and implemented by the beginning of 2016.
In the future, the HF/ VHF and UHF frequency spectrum will be monitored from eleven stationary
monitoring and direction finding (DF) stations.
New Fines For Poor QoS
Kenya's Ministry of Information Communications and Technology (ICT) increased penalties against mobile
operators failing to meet the quality standards set by the CCK. The ministry introduced a penalty of 0.2% of
an operator's annual revenue if it does not meet the quality standards. Currently, the CCK will fine a firm
KES500,000 (USD5,721.5) for breaching quality standards. The regulator expects operators to achieve a
score of 80% for eight indicators including completed calls, speech quality, call success rates and call drop
rates. The CKK revealed that mobile operators Airtel Kenya, Safaricom, Telkom Kenya and Yu were not
able to meet their Quality of Service (QoS) requirements for FY12/13. Telkom Kenya was the most
compliant among the four at 62% compliance level against the targeted 80%. The other three networks
managed to achieve scores of around 50%. Safaricom had the lowest ranking in completed calls rate and
also recorded the highest rate of dropped calls.
Regulator Mulls Non-Voice Q0S Evaluation
The telecoms regulator will start examining quality of services (QoS) on non-voice communication services
following a significant increase in subscribers using devices for non-voice services. According to the CCK's
Page 67
quarterly statistical report for the ICT sector, total local mobile traffic in Q4FY12/13 declined to 7.1bn
minutes, from 7.18bn minutes in Q4FY11/12. Communication alternatives such as SMS and mobile
applications such as WhatsApp have affected mobile voice traffic growth, according to the CCK. The
regulator is planning to appoint a consultant that will be tasked with developing an effective QoS
framework.
Regulator To Fine Unregistered SIM Users
The CCK plans to implement a new set of regulations, where mobile operators and their subscribers, as well
as agents, will be penalised for using unregistered SIM cards. Under the new rules, a subscriber using an
unregistered SIM card or providing incorrect information while registering a SIM card will pay a fine of
KES100,000 (USD 1,146.39) or be jailed for six months, while agents selling SIM cards to unregistered
subscribers will pay KES500,000 (USD 5,731.93) or serve 12 months in jail. Mobile phone operators that
do not comply with the rule will also pay KES5mn (USD57,320) or their executives will serve 12 months in
jail.
Mobile Number Portability (MNP)
On April 1 2011, mobile number portability (MNP) was rolled out by Kenya's four mobile operators in line
with regulatory requirements. The introduction of MNP follows extensive public consultations carried out
between 2004 and 2008 that showed that the market was ready for the service. MNP was initially meant to
start in December 2010 but was deferred to allow mobile operators more time to acquire and test their
equipment. The four mobile operators signed an agreement committing to the full implementation of the
service.
Subscribers wishing to port their number are expected to fill in the MNP form at the retail shop of the
network they wish to switch to and present original identification documents for verification. They are also
expected to pay a porting fee of KES200 (USD2.4), before they are issued with a new SIM card. They will
continue to use the service of their current operator until the automated porting process is complete.
According to data from the CCK, about 8,000 mobile phone subscribers in Kenya sent requests to switch
operators in the first two weeks of the implementation of MNP.
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CBK To Monitor M-Commerce Services
In April 2012, the CBK decided to start monitoring mobile money transfer transactions in the country to
ensure that the platforms are secure. The platforms are prone to cybercrime activities if left unchecked, said
communications ministry Permanent Secretary, Bitange Ndemo. The bank will conduct reviews of all
transactions on an annual basis to ensure that the systems are not tampered with. Securing mobile money
transactions is a key focus for the government considering the increasing value and volume of m-commerce
transactions in the country.
In October 2013, the CBK proposed draft regulations, the National Payment System Regulations 2013,
aimed at increasing the safety and efficiency of the national payment system. The proposal requires mobile
money services networks to open independent subsidiaries to manage cash remittances. The CBK also
intends to lower the amount sent via mobile phones, by proposing a daily limit of KES70,000 (USD823)
and capping the amount loaded at KES1mn (USD11,750) a month. CBK also proposed that all electronic
retail payment service providers, other than institutions already licensed by the CBK, would be required to
apply for authorisation before starting operations.
Further Cuts to MTRs
In July 2013, the CCK slashed mobile termination (MTRs) rate from KES1.44 (USD0.016) to KES1.15.
Additionally, the regulator has plans to further reduce the rate to KES0.99 in the future. Telecoms
operators Airtel and Essar have supported the move, claiming that it would help them reduce call rates and
implement a mass market strategy.
Licence Holders To Contribute To Rural Fund
In July 2013, the CCK revealed that all licensees in Kenya's communication sector, including mobile
operators, broadcasters, internet service providers and postal/courier service providers, will start remitting a
share of their revenues from July to the Universal Access Fund (USF) for investment in remote areas. The
contributors would pay 0.5% of their annual gross revenue to the regulator, which has set aside KES1bn
(USD11.36mn) to start the implementation of the project. CCK expects fund collection from the licensees to
be around SEK868.9mn (USD9.87mn) in FY14.
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CCK Licences Three MVNOs
In April 2014, the Communications Authority of Kenya has adopted a new strategy to promote competition
in the mobile market by awarding mobile virtual network operator (MVNO) licences to three mobile
commerce (m-commerce) companies. The three companies awarded MVNO licences are Finserve Africa, a
subsidiary of Equity Bank, Tangaza Pesa-owned Mobile Pay Limited and Zioncell Kenya Limited.
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Competitive Landscape
Table: Key Players - Kenya Telecoms Sector
Company Name
Ownership
Market
France Tlcom 70%, Government 30%
Fixed line, fixed wireless,

internet, Mobile
Vodafone 40%, Government 35%, other shareholders 15%
Mobile, fixed data services,

internet
Bharti Airtel 80%, other shareholders 20%
Mobile
Essar Group (in the process of being divided between

Safaricom and Airtel)
Mobile
Telkom Kenya
Safaricom
Airtel
yuMobile (shut down
services)
Source: BMI
Table: Selected Operator Financial Indicators (USDmn)
Company
Name
Safaricom (1)
Orange Kenya
2013
Revenue
2012
Revenue
2011
Revenue
2010
Revenue
2009
Revenue
2008
Revenue
2007
Revenue
2006
Revenue
1,658.5
1,418.0
1,245.0
1,104.0
977.4
794.9
614.6
453.0
112.4
120.0
97.0
122.8
121.6
150.8
166.3
na
na = not available. (1) = Safaricom's financial year is April-March. Source: Safaricom, BMI
Page 71
Company Profile
Telkom Kenya
SWOT Analysis
Strengths
Kenya's incumbent telecoms operator; it owns the country's biggest fixed-line

network and able to offer converged services.
The combination of Orange's expertise and financial backing, and the well-known
Orange brand, stands the operator in good stead.
Expanded its mobile base by 18% in 2013, increasing mobile data usage and
services to large companies and SMEs.
Weaknesses
The fixed-line network is very limited, and expensive to expand, so it is of limited

value.
The rapid spread of mobile services makes fixed line appear superfluous.
Telkom has been unable to leverage its fixed network infrastructure to build a
competitive converged services portfolio.
Telkom recorded a decline in revenue and subscriptions at the peak of the telecoms
price war in Kenya because of increased fixed to mobile substitution.
Huge debt burden and weak financial performance is slowing investment in network
development.
Regulatory data show Orange had the smallest market share of subscribers and voice
traffic in 2012 and 2013.
Opportunities
A three-year contract extension for the management of the National Optic Fibre
Backbone Infrastructure (NOFBI) starting July 2013 secures an important revenue
stream, at least in the medium-term.
Connection to undersea cables landing in Kenya improved international connectivity

and reduced the cost of data capacity, making it possible for Telkom to offer more
attractive services, especially in broadband where its fixed-line infrastructure gives it
some advantage.
Page 72
Orange's 3G network services provide an opportunities to offer mobile data and

advanced value-added services, and has pledged KES2.5bn (USD28.8mn) for a3G
network expansion plan.
Threats
Exit of Essar (YU mobile) should ease pressure on Orange.
The launch of MVNO services will increase competition in the mobile market
Liquid Telecom's re-entry into the residential fixed-line services market will add more
pressure on Telkom in that market segment.
Orange is one of the smaller operators in the market that may be hurt most by the
ongoing price war among mobile operators.
Cable companies making heavy investments in new networks and triple-play services
threaten to undermine Telkom's fixed-line advantage.
Telkom is falling behind key rivals, including Safaricom, KDN and AccessKenya, in the
battle for lucrative corporate services market.
Orange Groupformally notified the Kenyan government of its intention to sell its stake
in Telkom in April 2014.
Company Overview
In September 2008, France Tlcom's Orange brand took over the official brand of
Telkom Kenya, and, at the same time, the company launched a new GSM network,
which effectively made Orange Kenya the third mobile operator in the country. The
stated aim of the newly rebranded company was to increase its total subscriber base,
covering fixed-line, internet and mobile services. The company offers traditional fixedline services, with either prepaid or postpaid payment platforms, and fixed-wireless
services. It also provides ADSL and business data services. As of April 2014, Orange
Group has reportedly notified the Kenya government that it will put its 70% stake in
Telkom Kenya up for sale and is currently looking for buyers at the time of writing.
In August 2011, Orange Kenya launched 3G/HSPA network service in the country,
offering speeds of up to 21Mbps. The service will initially be offered in the capital
Nairobi, Mombasa and Kisumu, with plans to extend coverage to other regions.
Page 73
Strategy
Following the emergence of a price war among mobile operators in August 2010,
Telkom Kenya announced it will shift its focus towards data services in order to sustain
revenue growth. Therefore, the company announced that it will invest in a third subsea
fibre-optic cable, known as the Lower Indian Ocean Network 2 (Lion 2). The connection
will link the port of Mombasa with Mauritius through Madagascar when it is completed
in June 2012. Telkom Kenya already has a 22% stake in The East African Marine
System fibre-optic cable, known as TEAMS. It also owns 8% of the competing East
African Submarine System (EASSy), stretching 10,000km and linking 20 African nations.
In March 2012, Telkom restated its long-term strategy, with the board of directors
expressing confidence in the management team. The company is set to continue
investing in network infrastructure to increase wireless and wireline data capacity. The
emphasis on data comes in response to declining margins in the traditional mobile
market.
On April 15 2014, local newspaper Daily Nation, citing 'well-placed' sources, reported
that Orange Group had formally informed the government of plans to exit the market
and sell its controlling stake in the incumbent operator Telkom Kenya to another
investor. There was no immediate reaction from Orange or the government over the
media report. However, the move, if confirmed, would be consistent with earlier reports
that the operator was keen to exit unprofitable operations in Africa.
Corporate Structure Telkom Kenya was established under the Companies Act of 1999 as Kenya's first
telecoms operator. Today the company provides integrated communications services,

including voice and data services. The company has a limited copper-wire
infrastructure, which is increasingly supplemented with fixed-wireless solutions over
CDMA. The company was entirely government owned until France Tlcom bought a
51% controlling stake in November 2007.
In November 2012, the Kenyan Treasury announced that it was converting its KES4bn
shareholder loan to Telkom Kenya into shares as France Telecom swaps its KES15bn
debt into equity to ease the heavy debt burden on the company. In June 2013, local
newspaper Daily Nation reported that Kenya's incumbent operator Telkom Kenya had
requested a further cash injection from its two shareholders - the government of Kenya
(GoK) and France Telecom-Orange - to fund pressing operational needs and to preempt a deepening financial crisis. The latest bailout request follows Telkom's move in
November 2012 to recapitalise and restructure its operations through a cash injection of
KES10bn from GoK and Orange as well as writing off around KES30bn of shareholder
loans by Orange.
According to media reports, that deal may have reduced the GoK's stake in Telkom
from 49% to around 30% following Orange's debt to equity swap and the government's
inability to honour its part of the capital injection. In July 2013, it was reported that
Orange had decided to retain its share of 70% in its joint venture in Telkom Kenya with
the Kenyan government. The government, which holds the remaining 30% stake, was to
Page 74
inject KES2.4bn into Telkom Kenya to lift its stake up to 40%. However, the government
failed to meet the deadline and, as a result, the capital structure will remain unchanged,
according to Orange's spokesperson, Olivier Emberger.
On the same day reports came out about its plans to sell, Orange Kenya CEO, Mickael
Ghossein, disclosed that the company was expanding its 3G network coverage by
launching a Multi Service Access Node (MSAN) as well as expanding the national fibreoptic network. Orange, which manages the fibre optic backbone network on behalf of
the government, risks a cancellation of the management contract if it continues with
plans to exit the market.
Recent Financial
Results
Although Telkom Kenya does not publish financial information, parent company France
Tlcom publishes top line financial results for its Kenyan business.
Telkom recorded revenue of EUR19mn in Q114, unchanged from the same period in
2013. This was followed by revenue of EUR21mn in Q214 to bring total H114 revenue to
EUR40mn, compared to EUR38mn during the same period in 2013.
Telkom's 2013 revenue totalled EUR83mn compared with EUR90mn during the full year
ending 2012. The decline reflects the continued downward pressure on the operator's
financial and operational indicators from the intense competition in the telecoms
market.
Operational
Developments
In May 2014, Orange launched its 3G network in Nakuru County, Kenya. To celebrate
the rollout, the operator provided double its usual data offer on all internet packages
from 20MB to 20GB throughout the country, until July 20. Also in May, Orange
connected Marsabit, Nandi, Vihiga and Lamu counties to its Broadband Virtual Private
Network (BVPN) solution. The deployment raised the total number of counties now
connected to Orange's BVPN to 31. In April, the firm connected 27 governors' offices
and county assemblies to its network in order to deliver key ICT services, providing
customised end-to-end solutions for the firm's clients in all sectors across Kenya.
In April 2014, Orange announced a KES2.5bn 3G network expansion project for its
operations. The project involves expanding Orange's 3G network coverage by
launching a Multi Service Access Node (MSAN) as well as expanding the national fibre
optic network.
Financial Data
Operational Data
Annual Revenue 2010: EUR95mn

Revenue Q114: EUR19mn
Revenue Q114: EUR21mn
Mobile Subscriptions, December 2010: 1.056mn
Mobile Subscriptions, December 2011: 832,000
Page 75
Company Details

Mobile Subscriptions, March 2014: 1.026mn
Fixed-Line Subscriptions, December 2010: 381,000
Fixed-Line Subscriptions, March 2014: 158,000
Telkom Plaza
Ralph Bunche Road
PO Box 30301
00100 Nairobi
Kenya
www.telkom.co.ke
Page 76
Safaricom
SWOT Analysis
Strengths
Dominates the Kenyan mobile market, making it hard for new operators to challenge
it.
The expertise and experience of shareholder and network manager Vodafone

encourage innovation.
Safaricom has the largest 2G and 3G infrastructure in Kenya.
3G mobile data and M-PESA are successful services that Safaricom pioneered in the
Kenyan mobile market, and other operators are well behind the market leader in
developing their own alternatives.
Market share has stabilised after a sharp drop in 2010 at the peak of price
competition in the mobile sector.
Weaknesses
Although Safaricom has established free roaming agreements with some operators
from neighbouring countries, it has nothing to rival Airtel's One Network, a panAfrican free-roaming service that is very popular with Kenya's growing business
community.
Subscriber base remains heavily skewed towards lower value prepaid users.
Safaricom is present only in the Kenyan market, limiting its ability to compete with
other regional players.
Opportunities
Safaricom plans to launch Pay-TV services as part of a strategy to expand its nonvoice services portfolio. This would enable the operator to cross-sell different
products and offer bundled services.
Safaricom is partnering with parent company Vodafone Group to deliver Vodafone

business solutions in Kenya, a development that puts it in a good position to
maximise the growing opportunities in the corporate segment.
Safaricom captured a growing market for internet connectivity via its 3G mobile
network; this is set to continue growing.
Page 77
Kenya is still a high-growth market, with many new subscribers up for grabs,
providing excellent opportunity for growth within the traditional voice market.
Mobile financial services (MFS) continue to grow rapidly in the country and Safaricom
is well placed to remain the dominant player in that segment.
Due to acquire Essar's (yu mobile) network infrastructure as part of the latter's exit
from the market.
Threats
Proposed regulations which seek to implement interoperability of MFS platforms

could erode Safaricom's dominance of the MFS market.
New taxes on various telecoms products and services, such as VAT on devices and
tax increases on m-commerce services, could increase the downward pressure on
Safaricom's bottom line.
Although Safaricom is in a strong market position, increasing competition on the

market will threaten its position, as well as the licensing of MVNOs.
Cuts to interconnection rates could increase Safaricom's vulnerability to price

competition.
CCK attempting to impose conditions on Safaricom's acquisition of Essar's assets,

which would see it open up M-Pesa to all operators and MVNOs.
Company Overview
Safaricom has an extensive GSM network and offers 3G services in the major cities of
Nairobi and Mombasa, as well as in other parts of the country. At the end of March
2014, Safaricom's network comprised 3,140 2G base stations and 1,847 3G base
stations. The operator also had 203 WiMAX base stations for its fixed wireless data
service.
Strategy
Safaricom plans to launch IPTV and high-speed internet services to residential

customers in 2014. This will complement Safaricom's corporate services portfolio which
aims to diversify its revenue streams. The operator intends to offer fixed voice services,
data connectivity and managed network services to businesses in the country. The
managed network services will include cloud-based applications such as ERP solutions
and hosted payroll and accounting packages. The operator is keen to take advantage of
Page 78
revenue growth opportunities from non-voice services for residential and corporate
customers following the strong performance of that segment in recent years.
There are number of factors working in Safaricom's favour, in addition to the availability
of international bandwidth, which inform our positive view of its corporate solutions
strategy. Firstly, the market lacks a dominant player given the underperformance of the
incumbent operator Telkom and the lack of scale of alternative operators to take full
advantage of the opportunities. Secondly, Safaricom has one of the biggest wireless
and wireline network infrastructures in the country and will look to leverage these in its
portfolio of solutions.
Finally, and perhaps most significantly, Safaricom is partnering with Vodafone Global
Enterprises (VGE), the enterprise division of parent company Vodafone Group, for its
corporate solutions. This will enable Safaricom take advantage of Vodafone's expertise
and extensive global customer base. Vodafone already serves the international affiliates
of many multinationals operating in Kenya, a situation that would give Safaricom a head
start over its rivals in securing business with those firms. VGE, which announced plans
in July 2013 to set up a regional hub in Nairobi, provides round-the-clock services in 13
languages for more than 600 multinational customers with operations in Africa.
Corporate Structure Safaricom was established on April 3 1997 as a fully owned subsidiary of Telkom
Kenya. However, in May 2000, UK-based Vodafone Group acquired a 40% stake and
management responsibility for the company. In March 2008, the 60% stake still held by
the government, through Telkom Kenya, was reduced to 35%. The remaining 25%,
equivalent of 40bn shares, is traded on the Nairobi Stock Exchange. Safaricom had a
market capitalisation of around KES508.8bn as of August 2014.
Recent Financial
Results
Safaricom mirrors key investor Vodafone by operating an April to March financial

calendar.
Safaricom reported double digit growth in the voice and non-voice service segments
during the 12 months to March 2014, resulting in 16% year-on-year (y-o-y) total
revenue growth to KES144.7bn (USD1.6bn) and 31% y-o-y rise in net profit to KES23bn
(USD260mn). EBITDA increased 23.8% to KES60.9bn, bringing the EBITDA margin to
42.1%, and capital investment reached KES27.8bn.
Safaricom's financial performance FY2013/14 was a reflection of an equally strong
operational performance during the same period, which saw an 11.1% y-o-y increase in
subscriptions to 21.57mn. M-Pesa recorded more than 2mn transactions a day and
had 12.2mn 30-day active users, accounting for 56% of Safaricom's total subscriber
base. M-Pesa revenues reached KES26.6bn and contributed 18.4% to total revenues in
FY14. The number of fixed data subscriptions increased by 4.3% to 7,020 by the end of
March 2014.
Page 79
Network
Development
In November 2013, Safaricom announced that it intends to pull out of the joint venture
(JV) between Kenya's government and telecoms operators to roll-out a national 4G
network and apply for a licence to build an independent 4G network. A consortium of
investors, including the government, telecoms operators and equipment vendors, to
build Kenya's shared LTE network was formed in early 2012, but a lack of agreement on
the use of 700MHz spectrum and diverging strategic interests between various
participants has prevented them from reaching a shareholder agreement. Meanwhile,
Safaricom has finished laying down its fibre network in Nairobi and is now ready to
move on to upgrading its 2G and 3G base stations to 4G technology. The operator
deems that it can no longer wait around for an agreement while demand for high speed
data services from a growing number of tablet, computer and smartphone users
continues to rise.
Safaricom raised its capital expenditure by 8% in FY13/14, ended March 2014, to
expand its cable to meet internet access demand, according to Safaricom's CEO, Bob
Collymore. The operator raised its capital spending from KES25bn to KES27bn during
the year. The operator started laying 6,000km of fibre cable in August 2013 to connect
more people to the internet and fixed phone services.
Financial Data
Operational Data
Company Details
Revenue year ended March 2010: KES83.96bn

Revenue year ended March 2012: KES107bn
EBITDA full-year ended March 2010: KES36.6bn
Net profit full-year ended March 2010 : KES15.15bn
Net profit full-year ended March 2013: KES17.54bn
Net profit full-year ended March 2014: KES23.0bn
Mobile Subscriptions March 2010: 15.79mn
Mobile Subscribers March 2014: 21.570mn
Mobile and Fixed Data Subscriptions March 2010: 2.64mn
Safaricom Ltd
Page 80
Safaricom House
Waiyaki Way, Westlands, Nairobi
Kenya
+254-20-4273272
www.Safaricom.co.ke
Page 81
Regional Overview
Helios Towers Nigeria (HTN) was founded in 2005 by Helios Investment Partners (HIP), a Nigeriabased investment firm mainly focused on the ECOWAS region of West Africa. HTN is also funded by The
Albright Group, chaired by former US Secretary of State Madeleine Albright, London-based investment
group RIT Capital Partners, Quantum Strategic Partners, an investment group managed by the Soros
Fund Management, and the International Finance Corporation (IFC). HIP and its affiliates originally
invested USD58.9mn in the towers firm, in which HIP remains the largest shareholder with a 22.5% stake.
HTN owns around 1,200 towers in Nigeria. BMI believes HTN built the majority of these towers itself,
while it may have acquired a portion of them through its 100% acquisition of CDMA operator Multilinks in
2011. In an interview with TowerXchange, HTN CEO Inder Bajaj stated that on its 800 greenfield tower
sites in Nigeria the firm has a tenancy ratio of 2.6. This is one of the highest in the global towers industry
and well above the estimated tenancy ratio of 1.8 required to reach profitability.
In 2009, Helios expanded its towers footprint to other countries in Africa through the creation of Helios
Towers Africa (HTA), which has subsidiaries in Ghana, Tanzania and the Democratic Republic of the
Congo (DRC). This expansion was fuelled by a partnership with Millicom Internationa Cellular (Tigo),
where the mobile operator sold tower assets in the three countries to joint ventures (JVs) with HTA in 2010.
HTA owns a 60% share in the JVs in Ghana and the DRC, and in Tanzania HTA's share of the venture
increased from 60% to 75.5% when it purchased towers from Vodacom in 2013.
Table: HTA Footprint, July 2014
HTA Tower Acquisition Contracts

Date
Operator
Country
Value
No. of Towers
2010
Tigo
Tanzania
USD80mn
1,020
2010
Tigo
DRC
USD45mn
729
2010
Tigo
Ghana
USD64mn
750
2013
Vodacom
Tanzania
USD75mn*
1,149
2014
Airtel
Unknown
na
3,100
Other Towers
Tanzania
280
DRC
21
Unknown
751
Page 82
HTA Footprint, July 2014 - Continued
HTA Tower Acquisition Contracts

Total
7,800
*= estimate. Na = not available. Source: TowerXchange, BMI
Acceleration In Towers Deals
African mobile network operators' profits are being squeezed by declining revenues from traditional voice
services on one hand, and stricter quality of service requirements and rising demand for mobile services on
the other. In response, mobile operators across the region have implemented tower outsourcing strategies in
order to cut down their operating costs. These strategies have taken the form of long-term management
contracts, which allow towers firms to lease capacity to other tenant as well, or outright sale of tower assets
to independent towers firms. With Airtel now following in MTN, Orange and Tigo's footsteps with the
initial sale of 3,100 towers to HTA, other operators will have little choice but to implement the tower
outsourcing strategy as well, in order to ensure similar operational savings. BMI therefore expects the
towers market to pick up pace in the second half of 2014 and 2015.
Airtel's plan to sell its Nigerian towers portfolio has already launched momentum in one of the most
attractive telecoms markets in the continent. None of Nigeria's GSM has yet offloaded tower assets, but
since the announcement of Airtel's plans, MTN and Etisalat have also indicated plans to sell their towers in
the country. TowerXchange estimates MTN has around 9,000 towers in Nigeria, Airtel has 4,000 and
Etisalat 4,000. Fourth GSM operator Globacom's tower footprint is estimated at 4,000, but it has not
announced any plans to implement a tower outsourcing strategy. HTN competes with IHS Towers and
SWAP Technologies in Nigeria.
Helios has not specified which markets it plans to expand to in Africa, but its long relationship with Tigo
suggests there is a strong likelihood it is bidding on the operator's 800 towers up for sale in Chad. Tigo's
decision to sell its towers in Chad may be related to the sale of Airtel's towers, which is its main rival in the
country. BMI expects the adoption of towers strategies by other operators will compel Tigo to follow suit in
its remaining markets in the region, namely Rwanda, where it competes with Airtel and MTN, and Senegal,
where Orange is its main rival; these would all present acquisition opportunities for HTA.
Page 83
HTA has also placed a bid on Orange's towers in the DRC. Should Helios win the bid, it would be its first
deal with Orange, which has generally sought management contracts with the right to lease, while HTA
prefers the longer term security of outright purchase of tower assets. Orange is also in the process of
outsourcing management of its towers in Senegal and Egypt.
Finally, BMI expects HTN and HTA to express an interest in Airtel's remaining 11,900 towers, which we
believe still includes those in its Nigerian footprint. At the time of writing it was not yet known which
countries the initial sale covered, but Airtel is present in all three of HTA's markets as well as Nigeria,
meaning Helios could potentially acquire more of the operator's towers.
Helios A Hot Investment
In July 2014, HTA raised USD630mn of financing
Helios Has Scale

Owned And Managed Tower Assets By
Company, July 2014
from its existing investors. The firm stated that this

will help fund its acquisition of Airtel's 3,100
towers, as well as its expansion into new markets.
Also in July, HTN issued a USD250 senior

unsecured high yield bond through its fully owned
Dutch subsidiary, Helios Towers Finance
Netherlands B.V. The bond will mature in 2019 and
will be guaranteed by HTN and its subsidiary Tower
Infrastructure Company Limited. With the
publication of its credit rating (B/B(Stable)), ratings
agency Fitch Group stated that at the end of 2013 the
Source: TowerXchange, BMI
average remaining life of all tenancy agreements was

4.8 years and that HTN had total contracted revenues
of USD352mn.
HTN announced that the book for its bond was dominated by high quality emerging markets investors, with
total orders reaching more than USD650mn. A breakdown of investors by type showed that Fund Managers
accounted for 84% of the bond, Banks and Private Banks accounted for 11% and Insurance investors 5%. A
breakdown by region showed that 71% of investment originated from the UK, 16% from Europe, 8% from
South Africa, 4% from Asia and 1% from the Middle East and North Africa (MENA).
Page 84
HTN and HTA's attraction for international investors
Strong Mobile Growth
is based on its leading position in the region's towers

market as well as its presence in many of Africa's
key telecoms markets. While acceleration of
opportunities in Africa's towers market is driving
Mobile Forecast In Helios Markets (000),

2011-2018
60,000
200,000
growth in the sector, it is also creating challenges for

towers firms. With operators now all scrambling to
150,000
40,000
offload their network infrastructure, towers

100,000
companies are faced with the difficulty of recruiting

skilled engineers and other personnel to manage
20,000
50,000
their businesses at pace with demand. In this respect,

Helios' scale and decade of experience in building,
developing and managing telecoms towers gives it
an advantage against smaller rivals such as SWAP
0
2012
2013
2014f 2015f 2016f 2017f 2018f
Nigeria (RHS)
Tanzania (LHS)
Ghana (LHS)
DRC (LHS)
Technologies.
Meanwhile, the towers markets across HTA and
f = BMI forecast. Source: BMI, regulators, operators
HTN's footprints are also benefitting from strong

private consumption growth and the presence of at least four mobile operators in each country. These
dynamics are supporting rising demand for mobile voice and data services, and therefore growing demand
for telecoms infrastructure, and should ensure a high tenancy ratio on telecoms towers. Both elements are
key to ensuring the firm's long term growth prospects.
Risks To Outlook
Although we have a positive outlook for the telecoms and towers markets across Helios' footprint, there
remain important political and industry risks the tower company and its investors should be mindful of.
DRC - There are huge growth opportunities in the DRC's telecoms market, given the low penetration rate of
39.5% at the end of 2013 and its large population. However, weak state institutions mean the government
has little control over law enforcement in many parts of the country, transport and energy infrastructure is
poor, and economic dependence on the mining sector has resulted in high unemployment and stark income
inequalities. While these circumstances have limited other towers firms' appetite to enter the DRC, meaning
HTA can secure a higher tenancy ratio, it will have to price the high cost of deploying telecoms towers and
the risk of damage to its infrastructure into its investments in the DRC.
Page 85
Nigeria - Nigeria is in many ways the most attractive towers market in the region, with a positive economic
outlook, mobile penetration still below 75% in 2013, rapidly rising demand for mobile data services and
increasingly strict quality of service requirements boosting investment in the sector. However, as three of
the four major GSM operators prepare to offload their network infrastructure the towers market is set to
become fiercely competitive. Therefore, while demand for mobile network infrastructure will remain strong
over the next five years, increased competition between Helios and its competitors could see them pay a
premium to acquire existing tower assets and drive down tenancy tariffs in the country. Meanwhile, ongoing
violence in North East Nigeria will keep operating costs elevated in that region.
Over the next five years, BMI also anticipates consolidation across many telecoms markets in Sub-Saharan
Africa. In an effort to spark competition, broaden access to telecoms services and boost their incomes,
regulators in many countries awarded more mobile licences than the market is capable of supporting. Price
wars then swept across the region between 2010 and 2013 and low ARPUs are now weighing heavily on
smaller operators' ability to sustain their operations. This trend is evidenced by Airtel's acquisition of Warid
in Uganda and the Republic of the Congo, and the division of YU Mobile's assets between Airtel and
Safaricom in Kenya earlier in 2014.
We expect this trend to play out across many more markets in the region; Cte d'Ivoire, Ghana, the DRC
and Tanzania all stand out as countries where one or more operator has a market share of less than 10% and
risks becoming acquired by a larger competitor. BMI believes many of these smaller operators, which have
limited resources to invest in network expansion, are among towers firms' clients. Therefore, consolidation
within the mobile market will likely result in a reduced tenancy ratio for towers firms as mobile operators
merge their operations and eliminate duplicate coverage.
Page 86
Demographic Forecast
Demographic analysis is a key pillar of BMI's macroeconomic and industry forecasting model. Not only is
the total population of a country a key variable in consumer demand, but an understanding of the
demographic profile is key to understanding issues ranging from future population trends to productivity
growth and government spending requirements.
The accompanying charts detail Kenya's population pyramid for 2013, the change in the structure of the
population between 2013 and 2050 and the total population between 1990 and 2050, as well as life
expectancy. The tables show key datapoints from all of these charts, in addition to important metrics
including the dependency ratio and the urban/rural split.
Population Pyramid
2013 (LHS) And 2013 Versus 2050 (RHS)
Source: World Bank, UN, BMI
Page 87
Population Indicators
Population (mn, LHS) And Life Expectancy (years, RHS), 1990-2050
Source: World Bank, UN, BMI
Table: Kenya's Population By Age Group, 1990-2020 ('000)
1990
1995
2000
2005
2010
2013e
2015f
2020f
23,446
27,418
31,285
35,786
40,909
44,354
46,749
52,906
0-4 years
4,457
4,606
5,107
5,983
6,742
7,051
7,221
7,640
5-9 years
3,839
4,320
4,447
4,944
5,806
6,304
6,584
7,083
10-14 years
3,186
3,796
4,262
4,381
4,865
5,370
5,735
6,525
15-19 years
2,593
3,163
3,751
4,213
4,305
4,542
4,800
5,675
20-24 years
2,062
2,577
3,094
3,689
4,116
4,178
4,234
4,725
25-29 years
1,663
2,047
2,468
2,984
3,561
3,881
4,027
4,148
30-34 years
1,339
1,643
1,919
2,302
2,832
3,216
3,465
3,929
35-39 years
1,070
1,317
1,526
1,743
2,143
2,484
2,736
3,362
40-44 years
780
1,047
1,227
1,385
1,613
1,856
2,057
2,636
45-49 years
547
760
988
1,142
1,296
1,425
1,542
1,970
50-54 years
490
528
716
928
1,076
1,166
1,235
1,468
55-59 years
442
465
492
670
870
962
1,017
1,167
60-64 years
345
408
424
451
615
733
806
943
65-69 years
254
304
355
371
396
476
546
719
70-74 years
179
207
246
290
304
309
328
455
Total
Page 88
Kenya's Population By Age Group, 1990-2020 ('000) - Continued
1990
1995
2000
2005
2010
2013e
2015f
2020f
75-79 years
113
129
149
179
211
221
224
244
80-84 years
60
67
76
89
107
121
129
139
85-89 years
22
26
29
34
40
45
49
60
90-94 years
10
11
12
15
95-99 years
100+ years
e/f = BMI estimate/forecast. Source: World Bank, UN, BMI
Table: Kenya's Population By Age Group, 1990-2020 (% of total)
1990
1995
2000
2005
2010
2013e
2015f
2020f
0-4 years
19.01
16.80
16.33
16.72
16.48
15.90
15.45
14.44
5-9 years
16.38
15.75
14.21
13.81
14.19
14.21
14.08
13.39
10-14 years
13.59
13.85
13.62
12.24
11.89
12.11
12.27
12.33
15-19 years
11.06
11.54
11.99
11.77
10.52
10.24
10.27
10.73
20-24 years
8.79
9.40
9.89
10.31
10.06
9.42
9.06
8.93
25-29 years
7.09
7.47
7.89
8.34
8.71
8.75
8.61
7.84
30-34 years
5.71
5.99
6.13
6.43
6.92
7.25
7.41
7.43
35-39 years
4.56
4.80
4.88
4.87
5.24
5.60
5.85
6.35
40-44 years
3.33
3.82
3.92
3.87
3.94
4.18
4.40
4.98
45-49 years
2.33
2.77
3.16
3.19
3.17
3.21
3.30
3.72
50-54 years
2.09
1.93
2.29
2.59
2.63
2.63
2.64
2.78
55-59 years
1.89
1.70
1.57
1.87
2.13
2.17
2.17
2.21
60-64 years
1.47
1.49
1.35
1.26
1.50
1.65
1.72
1.78
65-69 years
1.08
1.11
1.14
1.04
0.97
1.07
1.17
1.36
70-74 years
0.76
0.75
0.79
0.81
0.74
0.70
0.70
0.86
75-79 years
0.48
0.47
0.48
0.50
0.52
0.50
0.48
0.46
80-84 years
0.25
0.25
0.24
0.25
0.26
0.27
0.28
0.26
85-89 years
0.10
0.10
0.09
0.09
0.10
0.10
0.10
0.11
90-94 years
0.02
0.02
0.02
0.02
0.02
0.02
0.03
0.03
95-99 years
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Page 89
Kenya's Population By Age Group, 1990-2020 (% of total) - Continued
100+ years
1990
1995
2000
2005
2010
2013e
2015f
2020f
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Table: Kenya's Key Population Ratios, 1990-2020
Dependent ratio, % of total working age

Dependent population, total, '000
1990
1995
2000
2005
2010 2013e
106.9
96.5
88.4
83.5
82.4
81.5
2015f
2020f
80.4
76.2
12,116 13,462 14,680 16,279 18,483 19,910 20,831 22,882
Active population, % of total
48.3
Active population, total, '000
50.9
53.1
54.5
54.8
55.1
55.4
56.7
11,330 13,956 16,605 19,507 22,426 24,444 25,917 30,024
Youth population, % of total working age
101.3
Youth population, total, '000
91.2
83.2
78.5
77.6
76.6
75.4
70.8
11,482 12,722 13,816 15,307 17,413 18,725 19,541 21,247
Pensionable population, % of total working age
5.6
5.3
5.2
5.0
4.8
4.8
5.0
5.4
Pensionable population, total, '000
634
741
864
972
1,070
1,185
1,290
1,634
Table: Kenya's Rural And Urban Population, 1990-2020
1990
1995
2000
2005
2010
2013e
2015f
2020f
Urban population, % of total
16.7
18.3
19.9
21.7
23.6
24.8
25.6
27.9
Rural population, % of total
83.3
81.7
80.1
78.3
76.4
75.2
74.4
72.1
Urban population, total, '000
3,927
5,007
6,223
7,757
9,643
11,004
11,985
14,770
Rural population, total, '000
19,520
22,411
25,062
28,029
31,266
33,349
34,764
38,135
Page 90
Glossary
Table: Glossary Of Terms
2G
second generation
GDP
gross domestic
product
NGN
next generation network
3G
third generation
GPRS
global packet radio

service
Mbps
megabits per second
ADSL
asymmetric digital subscriber

line
GSM
global system for

mobile
communications
MHz
megahertz
ARPU
average revenue per user
HDSL
high-bit-rate digital
subscriber line
MNP
mobile number portability
ASP
average selling price
HSDPA
high-speed downlink MoU

packet access
memorandum of understanding
BMI
Business Monitor International HPSA
high-speed packet
access
MOU
minutes of use
bn
billion
HSUPA
high-speed uplink
packet access
MPLS
multiprotocol label switching
BTS
base transceiver stations
HTML
hypertext
markup language
MSC
mobile switching centre
CDMA
code division multiple access
Hz
hertz
MVNO
mobile virtual network operator
CRM
customer relationship
management
ICT
information and
communication
technology
not available
mobile
D-AMPS digital-advanced
phone service
IDD
international direct
dialling
OIBDA
operating income before

depreciation and amortisation
DLD
domestic long-distance
ILD
international longdistance
POP
point of presence
DMB
digital multimedia
broadcasting
IPO
initial public offering
R&D
research and development
DSL
digital subscriber line
IP
internet protocol
SaaS
software-as-a-service
DSLAM
digital subscriber line access

multiplexer
IPTV
internet protocol TV
SDSL
symmetric digital subscriber line
DSU
digital subscriber unit
ISDN
integrated services
digital networks
SIM
subscriber identity module
DTH
direct-to-home
ISP
internet service
provider
SMS
short messaging service
DVB-H
digital video broadcastinghandheld
IT
information
technology
TDMA
time division multiple access
video broadcastingDVB-SH digital

satellite handheld
ITU
International
Telecommunication
Union
division-synchronous code
TD-SCDMA time
division multiple access
e/f
estimate/forecast
JV
joint venture
trn
trillion
EBITDA
earnings before interest,

taxes, depreciation and
amortisation
Kbps
kilobits per second
UMTS
universal mobile
telecommunications system
EC
European Commission
KHz
kilohertz
VOD
video on demand
Page 91
Glossary Of Terms - Continued
EMEA
Europe, Middle East and

Africa
km
kilometres
VoIP
voice over internet protocol
EV-DO
evolution-data optimised
LANs
local area networks
VLAN
virtual local area network
FDI
foreign direct Investment
LEC
local exchange
carrier
WAP
wireless application protocol
FTTB
fibre-to-the-building
LTE
long-term evolution
W-CDMA
wideband CDMA
FTTH
fibre-to-the-home
M2M
machine-to-machine WiBro
wireless broadband
FTP
file transfer protocol
mn
million
WiMAX
worldwide interoperability for

microwave access
Gbps
gigabits per second
MEA
Middle East and

Africa
WLL
wireless local loop
GPON
gigabit passive optical

network
MENA
Middle East and

North Africa
WTO
World Trade Organization
Source: BMI
Page 92
Methodology
Industry Forecast Methodology
BMI's industry forecasts are generated using the best-practice techniques of time-series modelling and
causal/econometric modelling. The precise form of model we use varies from industry to industry, in each
case being determined, as per standard practice, by the prevailing features of the industry data being
examined.
Common to our analysis of every industry, is the use of vector autoregressions. Vector autoregressions
allow us to forecast a variable using more than the variable's own history as explanatory information. For
example, when forecasting oil prices, we can include information about oil consumption, supply and
capacity.
When forecasting for some of our industry sub-component variables, however, using a variable's own
history is often the most desirable method of analysis. Such single-variable analysis is called univariate
modelling. We use the most common and versatile form of univariate models: the autoregressive moving
average model (ARMA).
In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality
is poor. In such cases, we use either traditional decomposition methods or smoothing methods as a basis for
analysis and forecasting.
BMI mainly uses OLS estimators and in order to avoid relying on subjective views and encourage the use
of objective views, we use a 'general-to-specific' method. We mainly use a linear model, but simple nonlinear models, such as the log-linear model, are used when necessary. During periods of 'industry shock', for
example poor weather conditions impeding agricultural output, dummy variables are used to determine the
level of impact.
Effective forecasting depends on appropriately selected regression models. BMI selects the best model
according to various different criteria and tests, including but not exclusive to:
R2 tests explanatory power; adjusted R2 takes degree of freedom into account;
Testing the directional movement and magnitude of coefficients;
Hypothesis testing to ensure coefficients are significant (normally t-test and/or P-value);
All results are assessed to alleviate issues related to auto-correlation and multi-collinearity.
Page 93
We use the selected best model to perform forecasting.
It must be remembered that human intervention plays a necessary and desirable role in all our industry
forecasting. Experience, expertise and knowledge of industry data and trends ensure that analysts spot
structural breaks, anomalous data, turning points and seasonal features where a purely mechanical
forecasting process would not.
Sector-Specific Methodology
Our Telecommunications industry forecasts are generated using a number of principal criteria, and differ
from the regression and/or time-series modelling used in other industries.
Average Market Growth
Indicator takes into consideration the historical growth patterns of the fixed-line, internet, broadband and
mobile markets, providing a basis from which to forecast. Using historical data is often the most desirable
method of analysis. In most cases, subscriber data are derived from individual operators and/or national
regulators.
Subjective Indicators
Indicators look at a number of factors, such as the following:
Neighbouring/similar states. These types of markets often share similar telecoms markets. For example,
Japan and South Korea are both highly developed technophile markets where growth prospects are high
in 3G. Meanwhile, China and India both offer high growth in successfully emerging markets.
Tracking growth. High growth may be more likely to be repeated in the near future, and is unlikely to
turn into a significant decline in the short term, although there may be exceptions to this rule.
Market maturity. Where markets have reached saturation, they are not likely to expand as fast as those
that are less developed.
Competition from alternative technologies, such as VoIP versus fixed-line, ADSL versus mobile
broadband.
Operator behaviour. Operators' corporate strategies and investment behaviour may dictate changes in the
telecommunications market. This is similarly the case for regulatory developments, which have been
accounted for in our integration of the Telecommunications Risk/Reward Ratings.
Sources
Sources used in telecoms reports include national ministries and media/telecoms regulatory bodies,
officially released company results and figures, national and international industry organisations, such as the
Page 94
CTIA, the GSM Association and the International Telecommunication Union (ITU) and international and
national news agencies.
Risk/Reward Ratings Methodology

BMI's Risk/Reward Ratings (RRR) provide a comparative regional ranking system evaluating the ease of
doing business and the industry-specific opportunities and limitations for potential investors in a given
market.
The RRR system divides into two distinct areas:
Rewards: Evaluation of sector's size and growth potential in each state, and also broader industry/state
characteristics that may inhibit its development. This is further broken down into two sub categories:
Industry Rewards. This is an industry specific category taking into account current industry size and
growth forecasts, the openness of market to new entrants and foreign investors, to provide an overall
score for potential returns for investors.
Country Rewards. This is a country specific category, and the score factors in favourable political and
economic conditions for the industry.
Risks: Evaluation of industry-specific dangers and those emanating from the state's political/economic
profile that call into question the likelihood of anticipated returns being realised over the assessed time
period. This is further broken down into two sub categories:
Industry Risks. This is an industry specific category whose score covers potential operational risks to
investors, regulatory issues inhibiting the industry, and the relative maturity of a market.
Country Risks. This is a country specific category in which political and economic instability,
unfavourable legislation and a poor overall business environment are evaluated to provide an overall
score.
We take a weighted average, combining industry and country risks, or industry and country rewards. These
two results in turn provide an overall Risk/Reward Rating, which is used to create our regional ranking
system for the risks and rewards of involvement in a specific industry in a particular country.
For each category and sub-category, each state is scored out of 100 (100 being the best), with the overall
Risk/Reward Rating a weighted average of the total score. Importantly, as most of the countries and
territories evaluated are considered by BMI to be 'emerging markets', our rating is revised on a quarterly
basis. This ensures that the rating draws on the latest information and data across our broad range of
sources, and the expertise of our analysts.
Page 95
Indicators
The following indicators have been used. Overall, the rating uses three subjectively measured indicators,
and around 20 separate indicators/datasets.
Table: Risk/Reward Ratings Indicators
Rationale
Rewards
Industry Rewards
- ARPU
Denotes depth of telecoms market. High-value markets score better than low-value ones.
- No. of subscribers
Denotes breadth of telecoms market. Large markets score higher than smaller ones.
- Subscriber growth,
% y-o-y
Denotes sector dynamism. Scores based on annual average growth over our five-year
forecast period and also take into account the penetration rate.
- No. of operators
Subjective evaluation against BMI-defined criteria. Evaluates market openness and

competitiveness.
Country Rewards
- Urban/rural split
A highly urbanised state facilitates network rollout and implies higher wealth. Predominantly rural states score lower, with overall score also affected by country size.
- Age range
Proportion of population under 24 years old. States with young populations tend to be
more attractive markets.
- GDP per capita, USD
A proxy for wealth. High-income states receive better scores than low-income states.
Risks
Industry Risks
- Regulatory independence
Subjective evaluation against BMI-defined criteria. Evaluates predictability of operating

environment.
Country Risks
- Short-term external risk
Rating from BMI's Country Risk Ratings (CRR). Denotes state's vulnerability to externally
induced economic shock, which tend to be the principal triggers of economic crises.
- Policy continuity
From CRR. Evaluates the risk of a sharp change in the broad direction of government
policy.
- Legal framework
From CRR. Denotes strength of legal institutions in each state - security of investment can
be a key risk in some emerging markets.
- Corruption
From CRR. Denotes risk of additional illegal costs/possibility of opacity in tendering/

business operations affecting companies' ability to compete.
Source: BMI
Page 96
Weighting
Given the number of indicators/datasets used, it would be inappropriate to give all sub-components equal
weight. Consequently, the following weighting has been adopted:
Table: Weighting Of Indicators
Component
Rewards
Weighting, %
70, of which
- Industry Rewards
65
- Country Rewards
35
Risks
30, of which
- Industry Risks
40
- Country Risks
60
Source: BMI
Page 97

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Q4 2014

Part of BMIs Industry Report & Forecasts Series

Business Monitor International

2014 Business Monitor International

Kenya Telecommunications Report Q4 2014

Industry Forecast .............................................................................................................. 17

Industry Risk Reward Ratings .......................................................................................... 23

Market Overview ............................................................................................................... 28

Key Developments .................................................................................................................................. 28

Subscriber Mix ...................................................................................................................................... 34

Table: Market Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Africa Mobile Content .............................................................................................................................. 44

Industry Trends And Developments ................................................................................ 62

Business Monitor International

Kenya Telecommunications Report Q4 2014

Regulatory Development .................................................................................................. 63

Competitive Landscape .................................................................................................... 71

Company Profile ................................................................................................................ 72

Regional Overview ............................................................................................................ 82

Demographic Forecast ..................................................................................................... 87

Business Monitor International

Kenya Telecommunications Report Q4 2014

BMI Industry View

Key Trends And Developments

Business Monitor International

Kenya Telecommunications Report Q4 2014

Business Monitor International

Kenya Telecommunications Report Q4 2014

Presence of internationally experienced operators Vodafone, Bharti Airtel and France

3G services have been launched by Safaricom, Orange Kenya and Airtel.

ARPU levels are among the lowest in Africa.

The implementation of interoperability of mobile financial services (MFS) platforms will

Introduction of Mobile Number Portability in April 2011 will support market

Access to undersea cables enables mobile broadband at mass-market price points,

Licensing MVNOs suggests the market is developing.

Business Monitor International

Kenya Telecommunications Report Q4 2014

Kenya Mobile SWOT - Continued

Further downward pressure on ARPUs, thanks to increased competition as more

Business Monitor International

Kenya Telecommunications Report Q4 2014

Presence of pan-African cable operator Liquid Telecom.

Access to multiple submarine cable systems and a local internet exchange.

Insufficient investment in network infrastructure is a major limiting factor for network

Safaricom is expanding its fixed-line portfolio in partnership with Vodafone Global

Investment in alternative broadband internet technologies is gathering speed,

Business Monitor International

Kenya Telecommunications Report Q4 2014

Kenya Wireline SWOT - Continued

The growing popularity of mobile internet services, particularly on 3G networks, will

Business Monitor International

Kenya Telecommunications Report Q4 2014

Government committed to market-based economic reform.

Allied with the US in the strategically important Horn of Africa region.

Perceptions of corruption are a hindrance to the government's image both at home

Sharp ethnic divisions.

Weak, inefficient security services.

Terrorist attacks in response to Kenyan forces' presence in Somalia.