We expect Kenya's mobile network operators to maintain a strategy of revenue stream diversification as the downward pressure on voice revenues continues on the back of lower tariffs and decreasing minutes of use. In addition to the expansion of the scope and functionality of m-commerce systems, we expect operators explore new mobile-crossover opportunities in other industries, such as health, agriculture, education and entertainment.
- Kenya's mobile market grew by 2.5% q-o-q in Q313 to bring total growth in 9M13 to 2.7%.
- Mobile ARPU appreciated by 11.5% in 9M13, consolidating on 7.8% y-o-y growth in 2012.
- The fixed-line sector contracted by 3.3% in Q313 and 15.7% in the 12 months to September 2013.
- The number of internet users in Kenya increased by 21.7% in the 12 months to September 2013.
Kenya is ranked 9th on BMI's Q214 Sub-Saharan Africa telecoms Risk/Reward Ratings, up from 10th in the previous quarter. The country scores above average in three out of the four categories on our ratings table. 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. We forecast Kenya's headline economic growth will reach 6.2% in 2014, driven increased consumer spending. 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 & Developments
As mentioned earlier, revenue stream diversification through the introduction of new non-voice and valueadded services is fast becoming a major competitive strategy in Kenya's mobile market. In January 2014 Safaricom, in collaboration with Changamka MicroHealth, British-American Insurance Company, and global health organisation PSI, introduced a micro-insurance health cover scheme, enabling subscribers to make payments using mobile commerce platform M-Pesa. Second-ranked Airtel also signed a partnership agreement with satellite pay-TV service provider MultiChoice, allowing its post-paid subscribers to use the Drifta app to access up to 16 channels via their smartphones and tablets. For its part, Orange launched SMS bundles for its prepaid subscribers, although BMI believes the service will face formidable competition from the growing number of over-the-top (OTT) messaging services.
Kenya's parliament has 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 commercial influence. BMI has a positive view of the establishment of a new telecoms regulator with greater independence in the discharge of its duties. This could boost investor confidence and lead us to upgrade Kenya's Industry Risk score in BMI's Risk/Reward Ratings (RRR). We would closely monitor the implementation of the KICA act and its impact on the country's telecoms market.