East African opportunities unclear as cellcos remain coy about data ARPU

Kenyatta Int'l Conference Centre, Nairobi: venue for this year's East Africa Com

Last year I had the pleasure of visiting Nairobi, Kenya for the first time, building meetings around the excellent East Africa Com conference and exhibition.

This year, given that my day-to-day commercial activity now does not give me much exposure to Africa, I will not attending. Were I still more active in Africa, however, I would certainly want to be there - and I would encourage anyone who does business with the telecoms operators of the East Africa region to head for the Kenyatta International Conference Centre on 27th-28th April.

This year's event will be graced by the presence of the Hon. Samuel Poghisio, the host country's Minister for Information & Communications and by Charles J.K Njoroge, Director General of telecoms regulatory agency the CCK (Communications Commission of Kenya). I don't recall the Kenyan Government and authorities being represented at such a high level at the 2009 event, so the organisers are to be congratulated for the upgrade.

Sponsors and exhibitors will doubtless also be impressed by the number of operator CEOs to whom they will have access during the two days of discussions. Of these, two of the biggest hitters are Michael Ghossein, CEO of France Telecom-controlled Telkom Kenya, the country's incumbent fixed-line operator and Michael Joseph, the long-standing CEO of Kenya's dominant (78.8% market share, according to WCIS) mobile operator Safaricom.

This may be one of the final conferences appearances for the latter, Joseph having announced his impending retirement. He joined the Kenyan operator in mid-2000, when Vodafone first invested in the company. Since then, he has guided the company from a subscriber base of fewer than 20,000 to over 15 million today. Along the way, Safaricom has become renowned for its M-Pesa mobile money transfer service, which has brought the advantages of financial services to very large numbers of Kenya's largely 'unbanked' population. Safaricom also attracted praise this week from Alexander Grouet of Mira Networks, a leading provider of connectivity and billing tools between business and mobile networks in Africa.

Grouet asks: "Would you plan a trip to a foreign destination if you didn't know what the place looked like, what there was to see, how much a hotel room cost and what local transportation was available?" Having concluded that most readers would not, Grouet then invites us to imagine that what we’re talking about is not your vacation, but your business. "Well that’s pretty much what it’s like for most content providers wanting to penetrate the SSA [sub-Saharan Africa] market", he continues. "Despite the hype, the market metrics WASPs crucially need in order to make the next step, such as data ARPU or WAP traffic, are virtually inaccessible. Even traditional market data resellers don't offer it, as optimistically named Africa VAS reports almost exclusively include blended indicators rather than content-specific ones." I don't recall if this is a fair accusation to direct towards the good folks at the reports business of Informa Telecoms & Media, the organisers of East Africa Com.

Even if it is, Grouet suggests that the fault for the scarcity of these vital data lies with operators. "Out of the 26 operators in the 5 countries I worked on last year (Nigeria, Kenya, Ghana, Senegal and Cote d'Ivoire) only 2 to my knowledge," he writes, "publicly released their data ARPU." The two cellcos in Mr. Grouet's good books are Safaricom and Starcomms, a Nigerian CDMA carrier.

"The most likely explanation for this", ventures Grouet, "is that the data figures are still so low on most networks that operators simply don’t want to release them at this stage." According to Grouet, even Safaricom's data ARPU, including M-Pesa, stands at just USD 1 monthly, while the figure for Starcomms, including EV-DO dongles, is just under USD 2 per month. "But at least, we know where they stand, and we will be able to measure their progress when they next update those figures," Grouet continues.

Grouet hopes that other African operators will break their silence on the topic of data revenues, not least because that unwillingness to share data "only has the counter-productive effect of making it harder for international content companies, who precisely could help operators boost their data traffic, penetrate their markets."

Let's see how many cellco attending East Africa Com agree with these sentiments. Were I to attend this year, I would probably like to pursue that line of questioning, not least because I have received marketing emails from Informa which suggests that the region's operators are somewhat focused on data services.

A speaker likely to turn in an entertaining presentation is Noel Herrity, CEO of Tanzania's Zantel, an operator in which the UAE's Etisalat owns a 51% stake. Mr. Herrity delivered a compelling, nicely paced talk at the 2009 iteration of the conference and delegates will be hoping for more of the same. Perhaps we can be optimistic about that - Herrity may be in buoyant mood in light of recent reports indicating that the operator has begun recording net customer additions again, following two quarters of net loss.

One speaker for whom it could be challenging to stay 'on message'? Bashar Arafeh, the COO of the East Africa Region for MEA mobile group Zain.

This might arise as a result of delegates' curiosity about the future of Zain's African operations. Subject to takeover speculation for many months now (see DTW articles passim.), these assets could well be the property of giant Indian cellco Bharti Airtel before too long. The most recent developments in this long-running saga may soon prompt a revival of the popular mini-series (well, it generated more hits than usual) which appeared here on-and-off for much of 2009, rejoicing in the clunky title 'Zain Africa Speculation Watch' (and variations thereon).

Other CxOs appearing on stage at next months event include:

• Hans Paulsen, CCO, Uganda Telecom
• Themba Khumalo, CEO, MTN Uganda
• Ali Bin Jarsh, CEO, Canartel, Sudan
• Julius Kinyua, CEO, Flashcom, Kenya
• Geoff Goss, CEO, Celsys, Zimbabwe
  

I'm sure this year's event will once again be a useful place to do business, gain market intelligence and enjoy the company of a crowd who always seem very open to networking and making new contacts.

East African opportunities unclear as cellcos remain coy about data ARPU

East Africa Com musings: Does it matter which submarine cable lands first?

The socio-economic impact of undersea cables in East Africa: the SEACOM view

Blogger Clement Nthambazale Nyirenda is a lecturer, researcher and consultant in Electronics and Computer Engineering at the Malawi Polytechnic, a constituent college of the University of Malawi. He is currently studying for a PhD in Japan at the Tokyo Institute of Technology. In February Clement wrote about the broadband speeds he enjoys in Tokyo and expressed his hope that a similar service might one day be available in his home country.

Malawi, as Clement noted, while usually considered to be part of Southern Africa, also lies in the easterly part of the continent, which is "the only region in the world that has neither intra-[continental] nor direct access to worldwide international cable networks." The region, Clement observes, "instead relies on expensive satellite communication" with "data costs... among the highest in the world."

Clement discusses the progress of the Eastern Africa Submarine Cable System (EASSy), "the first initiative proposed to connect countries of eastern Africa via a high bandwidth fibre optic cable system to the rest of the world." According to the EASSy website, the level of international telephone traffic per main line in sub-Saharan Africa is the highest in any region in the world, which is proof of there being "considerable demand in East Africa due to insufficient supply for telecommunications within the region." My own single experience of visiting that part of the world - last week's trip to the East Africa Com conference in Nairobi - does lead me to concur, as does the business of simply trying to make calls to other East African countries from the UK. As I noted in my most recent post here, the only frustrating aspect of my short trip to Kenya was finding it fairly difficult to stay on top of my day job via our company VPN. At both my hotel and the conference venue, Internet access was slow and unreliable.

My understanding is that there exists the hope that providing East African countries with improved connectivity could prove to be an effective catalyst for economic development in the region through the expansion of businesses based on the Internet, the provision of call centre services and the outsourcing of other back office functions.

EASSy is set to run from South Africa to Sudan, with landing points in six countries, and will be connected to several landlocked countries. A number of telecoms operators have invested in EASSy via WIOCC (West Indian Ocean Cable Company), which had a visible presence at last week's conference. These include state-owned wireline incumbent operators such as Botswana Telecommunications Corporation, Djibouti Telecom, Telecomunicacoes de Mocambique and soon-to-be-privatised ONATEL of Burundi.

Others in the WIOCC contingent are Orascom Telecom-backed MNO U-Com (of Burundi), Telkom Kenya, Dalkom (Somalia), Zantel, Uganda Telecom, Israel's Gilat Satcom and the Lesotho Telecommunications Authority.

From South Africa, direct investors in EASSy include Neotel, MTN and a consortium of Telkom (SA) and Vodacom. Futher direct investors in the project are Telecom Malagasy, Mauritius Telecom, SUDATEL, Tanzania Telecommunications Company, Comores Telecom and Zamtel (no, that's not a repeat of Zantel). From beyond the region, other backers are BT, Saudi Telecom, Bharti Airtel, Etisalat and France Telecom.

In his February blog post, Clement Nyirenda notes that EASSYy was once expected to be ready for commercial use in Q2 2007 but that construction did not get underway until March 2008. Clement reports (confirmed by a more recent Compterworld Kenya article) that the project is now slated for completion and commercial service in the second half of 2010 - three years behind schedule. "EASSy has not been EASY", comments Clement.

In Clement's opinion, "the major problems hampering the progress of the EASSy project stem from the fact that it is a joint venture of more than 20 largely monopolistic parastatal telecommunication bureaucracies." I shall leave it to individual readers to decide which (if any) of the project's backers fit this rather critical description. "In Africa," says Clement, "the culture of working together in such a large grouping is not common."

Wrangles between partners do seem to have been a feature of the project, at least as far back as June 2006, when a meeting of ICT ministers from Eastern and Southern African countries helped resolve disagreements among project participants, according to Sammy Kirui, the chairman of EASSY's project management team.

Regarding the most recently announced delays, the Computerworld article quotes WIOCC CEO Chris Wood, who said late last month that "the delays have been caused due to optimizing the cost structures and finalizing the agreements between all participating carriers". Wood, states the article, is not worried about the delays because the most important thing is the long-term stability of the financial structure of the cable system. "Time and again", Wood said, "the telecom industry has seen private equity financed companies build cables and then go bankrupt within a few years as their business model, hit by high costs, proved unattainable."

EASSy is just one of three submarine cables set to improve the region's connectivity. Another is TEAMS (East African Marine System). Etisalat appears to be spreading its bets in the race to connect the region, having a 15% stake in TEAMS in addition to its investment in EASSy. The other 85% of the ownership of the TEAMS project is split between a diverse group of interests including the Kenyan Government, Telkom Kenya (another one which is backing two horses) and Kenya's market-leading cellco Safaricom. Also involved from Kenya are the country's largest private data carrier Kenya Data Networks and most recent mobile market entrant Essar Telecom Kenya, whose billboards I saw all over Nairobi last week. The advertising of another TEAMS backer, the cable MSO Zuku, was also very prominent as I caught a glimpse of the city during cab rides between meetings.

Kenyan players dominate the consortium, with ISP AccessKenya and Jammii Telecommunications (which provides access to the Internet Backbone to telcos, ISPs, and large enterprises) also involved.

One more Keynan TEAMS backer is Flashcom, an integrated telecommunications solutions provider offering voice, data and SMS services with a collection of network assets including a CDMA2000 WLL and ISDN services over Fibre. Flashcom's CEO Joe Kimani was on the speaker panel at last week's conference, but unfortunately I didn't get the chance to catch what he had to say. From beyond Kenya, a small stake in TEAMS is held by Africa Fibrenet of Uganda.

The other submarine cable on the East Africa scene is SEACOM, whose investors state that the project will ensure access to low cost bandwidth, thereby encouraging the growth of existing and new industries, as well as education and e-government.

Does the region need three undersea cables? If all of this is thought of as a race to land the cables and start doing business first, will whichever project finishes last find itself out of the game? A Business Times (Tanzania) article of last Friday contends that the answers to these questions are, respectively, 'yes' and 'no'.

In this article, the scene is set with an illustration of the degree to which the current paucity of connectivity impacts upon businesses in the region. The claim is made that a large corporation in Tanzania can pay about USD 3000 a month just to ensure a reliable Internet connection for its network. According to the article, this figure rises to USD 7000 to cover a megabyte of bandwidth per computer in a medium-sized office in Kenya. "A business connection in an urban center in the US," continues the article, "can cost as little as USD 25 a month".

The article compares the economics of the VSAT and undersea cable industries and adds that "fiber optic cables are low latency: they can carry information more than ten times faster than a VSAT to satellite to cable connection."

When making a comparison between the three submarine cables, the article contends that they all have "roughly the same capacity", but notes that "each connects a different combination of countries and ownership."

The article acknowledges that "there has been much hype in the media about which cables will land first" but makes the argument that "the success of one cable does not render the others useless." The view expressed is that redundancy is needed to ensure the security of broadband supply and to stimulate competition, thereby reducing prices for users. "Tanzania will be able to make room for both the EASSy and the SEACOM cables, as well as any connectivity provided by TEAMS", concludes the piece. Plenty of room for all, then, it seems.

East Africa Com musings: Does it matter which submarine cable lands first?

East Africa Com report: Telkom Kenya positions as only convergence player in a competitive mobile market

TELKOM KENYA: ambitions of being East Africa's only quad-player

Last week I spent two days nipping in and out of the Com World Series East Africa Com conference and exhibition, organised by Informa Telecoms & Media in Nairobi, Kenya. I had hoped to share some of what was discussed here in real-time, blogging merrily away from the conference venue. A busy schedule made this difficult, compounded by the non-availability of a genuinely fast and reliable Internet connection at either the venue or my hotel.

Broadband speed and price in the region was a topic visited by a number of the conference speakers. Peter Reinartz, the Deputy CEO of Telkom Kenya/Orange Kenya, for instance, spoke about the effects of the long-anticipated arrival of submarine fibre optic cable. Reinartz poured cold water on suggestions that the retail price of broadband services would fall by as much as 90%, but did pick out the region's improved connections to the rest of the world as being a key driver of the kind of converged offerings his company is putting together.

Telkom Kenya was privatised in 2007, with France Telecom acquiring a 51% stake. The Kenya Government retains the other 49%. As part of the process, the company's controlling stake in market-leading cellco Safaricom was transferred to the Government, temporarily taking Telkom Kenya out of the GSM game. This brief period away from the heat of the battle in the mobile space ended with the September 2008 launch of Orange Kenya. With the later arrival of Essar-managed Econet Wireless Kenya (branded Yu), the country's mobile market is now home to four competing providers: Zain also has a presence.

As of March 2009, according to the World Cellular Information Service, the Kenyan mobile market is split as follows:

1. Safaricom: 76.79%
2. Zain Kenya: 17.41%
3. Telkom Kenya/Orange: 3.90%
4. Yu: 1.89%

The fourth player in the list above has recently been the subject of takeover speculation. On the day the conference opened, South African news portal Business Report was carrying denials from Yu CEO Srinivasa Iyengar regarding plans to sell the operation to MTN. If such a transaction were ever to take place, the Kenyan market would become the scene of a competitive struggle between only well-funded regional giants.

In his presentation, Reinartz spoke about not wanting to be Kenya's "third mobile operator", preferring to position the company as the country's only converged operator. 2009, he said, is to be a crucial year in the development of this strategy. Having launched a unified brand, a single touchpoint for customers and having "built an image as a full alternative to [the] mobile incumbents" in 2008, Reinartz set out his stall for this year: reinforcing existing customer retention initiatives and rolling out the first layer of convergent propositions. One of these is voice pricing unification across Telkom PSTN, Orange 'Fixed Plus' (CDMA WLL) and Orange mobile services. Customers can enjoy friends-and-family discounts across all these services.

At the conference, Zain was represented by Raed Haddadin, the group's Commercial Director for East Africa. A theme about which Mr. Haddadin spoke enthusiastically was mobile money. In this space, the Zain offering, branded Zap, enables under-banked people to desposit and withdraw cash, transfer funds to family and friends, top up mobile airtime and pay bills for goods and services.

Other tasks prevent me from rambling on at length now about other information I gleaned at the conference. I'll try to share more in the coming days.

East Africa Com report: Telkom Kenya positions as only convergence player in a competitive mobile market

See you in Nairobi?

Next week I am going to spend a few days in Nairobi, Kenya, where I will be attending East Africa Com, the region's telco sector conference and exhibition organised by Informa Telecoms & Media. The event takes place April 1-2 at the Safari Park Hotel, with highlight including presentations from:

• Raed Haddidin, Commercial Director, East Africa Region, Zain Group
• Michael Joseph, CEO, Safaricom, Kenya
• Peter Reinartz, Deputy-CEO, Orange/Telkom Kenya
• Mohammed Bouhelal, Chief Corporate Affairs Officer, Canar Telecom, Sudan
• Noel Herrity, Director General, Zantel, Tanzania
• Shiletsi Makhofane, Acting Chief Executive Officer, Africa Online
• Deng Malok, Managing Director, Bilpam Telecommunications, Sudan
• Charles J.K. Njoroge, Director-General, Communications Commission of Kenya
• Joe Kimani, CEO, Flashcom, Kenya

Anyone based in East Africa or wanting to do business there will find this event a useful place to put faces to names, do some networking and get a sense of what's happening in the region. If you do plan to be there and have not already booked accommodation, you will find that the conference venue itself is fully booked. The Windsor Golf Hotel and Country Club seems to be nearby and of a comparable standard. Anyone who ends up there is welcome to look me up for a chat over breakfast and to share a taxi to East Africa Com conference. Anyone who reads this, plans to be in Nairobi next week and wishes to compare notes on the telecoms sector in emerging markets can drop me a line at developingtelecoms@yahoo.com. While I will have a full schedule of meetings related to my day job, I do plan to write about the conference sessions and any announcements made at the event. I'll try to make it look pretty by adding some photos. Watch this space...

See you in Nairobi?