Market Insight

Kenya’s mobile market welcomes fourth mobile operator ‘Faiba4G’

December 14, 2017  | Subscribers Only

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Broadband internet provider Jamii Telecommunications (JTL), previously just an Internet service provider (ISP) has launched their 4G LTE mobile network – Faiba4G. The new network will offer Voice over LTE (VoLTE) and data services.

  • JLT entered the Kenyan telecoms space in 2004 providing wholesale and retail data services via Fibre To The Home (FTTH) and fixed wireless networks, satellite and WiMAX.
     
  • Faiba4G coverage currently includes areas in Nairobi, Thika, Machakos, Nakuru, Eldoret, Mombasa, Athi River and Syokimau with plans to extend across Kenya.
     
  • Faiba4G will offer subscribers free on-net calls for life, granted the subscriber has an active data bundle and 1-hour unlimited ‘Fisi’ data bundles for KSH150 (approximately US$1.50).
     
  • Kenyan’s mobile market has a mobile SIM penetration rate of 71% and is dominated by Vodacom-owned Safaricom, which leads the market with a 75% market share.
     
  • The entrance of international mobile network operators Airtel (2002), Orange (now Telkom Kenya - 2013) and Yu (2008) failed to challenge Safaricom’s dominance, which led to Orange selling off their Kenyan subsidiary and Airtel acquiring Yu in 2015.

The Kenyan mobile market has three mobile network operators (MNOs) – Safaricom, Airtel Kenya, and Telkom Kenya that provide services to 38.3 million mobile subscribers. Whilst the success of M-Pesa and other mobile payment systems in Kenya stimulated the issuance of mobile virtual operator (MVNO) licences for niche operators Equitel, Mobile Pay and Sema Mobile who provide limited mobile-based services for 1.9 million mobile subscribers.

 

Our Analysis

Kenya’s Communication Authority (CA) granted JLT a trial 4G mobile licence, in September 2016. JLT paid an initial fee of 103,000 KES (approximately US$1000) with an additional 2.5 billion KES (approximately US$ 24 million) due upon completion of the one-year trial and application for a Tier 2 Network Facilities Provider licence.

The existing MNOs pushed back following the issuance of a temporary trial licence that gave JLT 700 MHz spectrum access without the standard auction procedure. However, the CA’s chairperson clarified that JLT’s Tier 2 licence provisions for nationwide infrastructure and regional not national spectrum allocation forbore the need for an auction.

Trial licences have been issued in South Africa, Cameroon, Uganda and now Kenya as a way to allow potential mobile, broadband or TV operators to test technology and ensure there is adequate preparation for network investment and operational costs prior to acquiring a full licence. While it is not uncommon for regulators to take actions that promote new entrants into mature markets, the terms of the licensing for attractive 700MHz spectrum are generous.

Incumbent operator Safaricom, leads the Kenyan mobile market with 75% of the market share due in part to the popularity of their digital payment service M-Pesa, which catapulted the operator to success over 10 years ago. Airtel and Telkom Kenya have struggled to compete Safaricom over the years as their mobile operations currently hold just 17% and 8% (respectfully) of the mobile market share.

Kenyan mobile service subscribers and the smaller operators have previously voiced concern over the Safaricom’s dominance, which Safaricom have maintained through network coverage and nationwide access to M-Pesa services that also disrupted the banking industry. Safaricom launched their 4G LTE network in 2014, and reported coverage of all Kenyan countries during December 2017.

Safaricom’s dominance has also impeded investments by Airtel and Telkom Kenya into their 4G LTE network rollout, as with a lower number of subscribers, the return on investment would be significantly lower for both operators. Despite this, Telkom Kenya launched a limited 4G network in June 2017, leaving Airtel Kenya as the only 3G-only network in Kenya.

JLT has invested 5.1 billion KES (approximately US$ 48 million) in infrastructure and operational costs leading up to the launch of Faiba4G. To date, JLT has installed approximately 300 base stations in Kenya, with plans to triple the amount of base stations within three years. Faiba4G will compete directly in the mobile data segment as a next generation access (NGA) operator that will focus on increasing 4G coverage and affordable access, though also providing a full mobile voice service.

In relation to data-only bundles, Faiba4G is on average 50% cheaper than all other networks across different validity periods, with short validity data bundles tending to be more popular due to their low entry costs. The ‘Fisi’ one-hour tariff for example is likely designed to meet demand for downloading multiple films. Whilst Safaricom, Airtel Kenya and Telkom Kenya compete best in their voice, SMS and data bundles where Faiba4G tariffs are similar or more expensive. Their middle bundle, which includes 2GB per month, 350 minutes and 500 SMS is priced at KSH2500 ($24) – twice the cost of s similar Safaricom bundle. However mobile data bundles come in at KSH1000 for 25GB with 30 day validity. This indicates their focus is on providing fast, cheap data.

The impact of new mobile operators has not significantly changed the Kenyan market in the past, however the increase in data usage and demand for services that require high-speed data could see Faiba4G capture a significant portion of Kenya’s mobile market share.

Research by Market
Mobile & Telecom
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