Kenya’s mobile sector recovering from slump

Details: James Barton; Category: Trends & Forecasts; 18 April 2012; 8483 views

Kenya's mobile market returned to strong subscriber growth in Q311 after a slowdown in H111, which can be attributed to the discounting of inactive SIMs and increasing mobile saturation in urban areas...

According to market data published by the CCK, the mobile market expanded by just 4.8% during Q311 with net additions of 1.217mn subscribers to reach 26.494mn. This was significantly more than net additions of just 312,000 subscribers or growth of 1.2%, in H111. All four mobile operators in the country recorded positive growth in Q311, with market leader Safaricom accounting for 48.8% of net additions and second-ranked Airtel accounting for 45.9%. Essar and Orange accounted 3.9% and 1.4% respectively of net additions in Q311.

The surge in mobile subscriptions in Q311 was likely due to promotions run by the operators as opposed network expansion to underserved areas. However, rural expansion is vital for sustainable subscriber growth in the medium term. Total mobile subscriptions are expected to reach 39.5mn by 2016 with a penetration rate of 83.1%.

Renewed efforts at rural roll-out will boost subscriber growth. In a bid to encourage network expansion to underserved areas, the Kenyan government reduced spectrum fees by an average of 41% in October 2011. However, operators are increasingly investing in high value services such as mobile data to drive revenue growth, as opposed to network expansion in rural areas characterised by low ARPUs and high input costs.

Kenya's fixed-line sector continued to trend downwards in 9M11, with total net losses of 29,614 subscribers. The downtrend is driven by the PSTN segment, which recorded net losses of 79,646 subscribers in the 12 months to September 2011 to reach 148,745. By contrast, the fixed wireless segment recorded net additions of 60,809 during the same period to reach 202, 389 subscribers.

According to the CCK, the number of internet users in Kenya reached 14.3mn by September 2011. The regulator's data also showed a steady growth in mobile data access lines, although it did not reveal the number of 3G-based mobile internet connections. Orange Kenya launched commercial 3G services in August 2011 and Airtel is expected to follow suit by April 2012. Along with network investment by fixed network broadband service providers, this will drive growth in the internet sector, pushing broadband penetration up to around 1.8% by 2016.