Government considers licensing mobile operators for fixed line market; cellcos remain unconvinced

16 Jun 2004

With Kenya’s fixed line monopoly due to expire at the end of this month, the government is exploring the possibility of allowing the country’s mobile operators to move into the wireline market as a way of boosting competition. State-owned Telekom Kenya is to face its first rival in the sector when newcomer Bell-Western launches under the brandname Warsan Communications in Garissa, Wajir and Mandera in the North Eastern Province next month. And state planning minister Anyang’ Nyong’o says the government is keen to begin ramping up investment in the sector, which could lead to the licensing of mobile operators Safaricom and Kencell to provide wireline services.

However, it is unlikely that either cellco will be overly excited about the development given that both have already amassed far larger customer bases in four years using digital wireless technology than Telekom has managed in far longer. Safaricom is expected to be even more reticent given that Telekom is one of its majority shareholders and the fixed line incumbent is unlikely to want to compete with its own subsidiary. This could all change, however, if rumours that Telekom is considering selling part of its 40% stake in the cellco to fellow shareholder Vodafone are borne out. Meanwhile, Kencell was recently acquired by Netherlands-based Celtel International, which is very much a wireless-orientated company, boasting a portfolio of 13 cellcos across Africa.

Incorporated in 1999, Telkom Kenya’s fixed line customer base has stagnated around the 325,000 mark for the last four years, with penetration languishing at just over 1%. The lack of competition means that it has not been pushed to expand its networks and launch new services. Safaricom was the nation’s first mobile operator, launching analogue services in 1997 before upgrading to GSM following investment from Vodafone in 2000. It controls almost two-thirds of the wireless market having expanded its customer base by 114% in 2003. Kencell broke Safaricom’s wireless monopoly in 2000 and has already built up a customer base that is double that of the entire fixed line market.

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