Africans still pay far more for telecommunications than western countries as a proportion of their overall income. In Kenya, the darling of African telecom expansion, where many incomes still fall below the World Bank’s poverty baseline of $2.50 per day, it is no different. “Currently poverty stands at 40-42%, which is far cry from the 56 percent in 2000, but still very high, yet the country is approaching 30 million mobile users,” says one East African telecom investor, “as a result, telecom investment in Kenya is still viewed as a potential gold mine.”
Mobile phone charges are higher in Kenya because many customers use pre-paid cards rather than sign-up for monthly contracts which include large packets of minutes at certain price levels, which then lowers the effective cost per minute. Average broadband download speeds have grown to about 4,478 kbps in 2012 — up from 671 kbps in 2009 — but costs have remained high. As a result, only 2 percent of Kenyans subscribe to broadband services, according to the Communications Commission of Kenya. It is this story line that has private investors “flocking to Kenya in droves” says a local Kenyan mobile developer. The story, he adds, is already great but with far more opportunity for improvement and growth at great gains to the early movers.
Earlier this year, Microsoft, in collaboration with Kenya’s Ministry of Information and Communications and Indigo Telecom, announced a pilot project to deliver low-cost wireless broadband access to previously under-served communities in Kenya. The pilot project is part of Microsoft’s 4Afrika Initiative focused on facilitating broadband and technology access across the continent. Telecom Kenya East Africa Capital Partners (EACP), a private equity firm based in Nairobi, manages the Africa Technology Media and Telecoms (ATMT) Fund which is focused on investing in African companies operating in the information and communications technology (ICT) sector. As part of the ATMT Fund, EACP has also established Small and Medium Enterprise (SME) Ventures which aims to invest in those same early-growth companies that Microsoft hopes to reach with its 4Afrika Initiative. Additionally, Kenya’s top telecommunications operator Safaricom announced late last year that it plans to invest $95 million over the next four years laying additional fiber-optic cable.
These investments highlight the growing confidence within Kenya. By 2020, experts predict that Kenya could have mobile penetration rates beyond 100 percent (similar to South Africa). Experts also add that this growth will drastically […]
