Q4 reports show positive outlook for telecoms sectors in Kenya & Sudan

Updates for the fourth quarter of 2010 are now available for the telecommunications sectors in Kenya and Sudan. Covering mobile, fixed-line and internet sectors, the reports from BMI Research feature the latest market data released by service providers and regulators.

The 3G market in Kenya is set to become more active with the allocation of licences to Bharti Airtel’s Zain Kenya and Telkom’s Orange. Alternative operators Zain Kenya, Telkom Kenya and Essar have successfully lobbied for a cut in 3G spectrum prices from the US$25m paid by Safaricom in 2007 to just US$10m.

Telkom Kenya is reported to be trialling a 3G service on a pilot basis at a number of sites in Nairobi. Although it is yet to apply for a licence, the director-general of the telecoms regulator expects it to do so soon, a move he believes will increase the penetration of data services through more competitive pricing. Furthermore, the Kenyan government is reported to have extended a shareholder loan to the operator that will help pay for the 3G licence fee.

Meanwhile, mobile services, in the form of Safaricom’s 3G mobile dongles, have become a massive part of the broadband landscape, overtaking fixed broadband connections.

In August 2010, the CCK revised down mobile interconnection fees from KES4.42 (US$0.06) per minute to KES2.21 (US$0.03). The move is aimed at encouraging telecoms operators to lower call tariffs. The CCK aims gradually to reduce the fees to KES0.99 (US$0.013) by 2013. Zain has reacted fastest to the cut in interconnection rates by slashing call rates and SMS costs by up to 50% and 80% respectively.

In June 2010, the CCK initiated the process of mandatory registration of SIM cards and subscribers' details. Kenyan President Kibaki issued a directive in 2009 necessitating SIM registration. The registration of SIM cards will help the government in reducing mobile phone-aided crimes and enhancing national security. Subscribers were directed to get their details registered by the end of July 2010, with failure to do so resulting in the disconnection of their services.

The CCK has announced that the country will introduce mobile number portability (MNP) by December 2010, which will enable subscribers to change their service provider without losing their mobile number. Dutch company PortingXS was awarded a contract by CCK to supply, install, commission and manage MNP services in order to boost competition in the mobile market.

Much like Kenya, Sudan enjoys a robust telecommunications sector, with a large, relatively well-equipped system by regional standards, including a national fibre optic backbone and international fibre connections.

With penetration rates in all market segments still relatively low, it is regarded as one of Africa’s most lucrative telecommunications markets, receiving hundreds of millions of dollars in foreign investment per year.

The national telco, Sudatel has been privatised for more than ten years, with major shares and management control now held by Etisalat of the UAE and Qatar Telecom. It is also listed on several regional stock exchanges. The company presided over the world’s fastest growing fixed-line market until it started substituting traditional copper lines with CDMA2000 fixed-wireless access in 2005.

Competition in the fixed-line market comes from Canartel which, interestingly, is also majority-owned by Etisalat. It too opted for CDMA2000 technology to roll out fixed services cost-effectively, and, like Sudatel, is offering wireless broadband services through this network following an upgrade to the EV-DO standard. The company is lobbying for a licence to offer mobile services as well but is meeting resistance from the other operators.

Sudatel exited the mobile market when it sold its GSM network to Celtel (now Zain) at a record price in 2006, following the arrival of competition the year before from Bashair Telecom. Sudatel then re-entered the mobile market independently with its CDMA network under the brand name Sudani. At the end of 2009 the company launched a GSM-based network overlay, keeping up with Zain and MTN in offering third generation services including HSDPA mobile broadband with up to 7.2Mb/s.

Broadband pricing is still high and varies widely between the different operators, and a stark contrast exists between their respective average-revenue-per-user levels, with the leading operator achieving twice as much as one of its competitors, one of the highest ARPU levels in the region.

Under a peace agreement, the oil-rich south of the country, which has long been beyond the central government’s control and deprived of development, is establishing its own independent telecommunications regime, creating new opportunities for service providers and equipment suppliers.

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