Kenya Data Networks announces 30% price cut; Safaricom WiMAX acquisition finally approved

5 Oct 2010

Kenya Data Networks (KDN) has announced that it plans to lower its broadband prices by 30% later this month, in a bid to increase its presence in the lucrative business market. Last month CommsUpdate reported that KDN had opted to turn its back on the residential broadband market and focus its efforts on the corporate sector instead. The company will reportedly reduce its international internet wholesale access price from KES32,300 (USD400) to KES22,610 (USD280) per megabyte, per month. Business Daily Africa estimates that the industry average is currently USD400. The move is expected to trigger a price war between KDN’s rivals in the wholesale market: Safaricom, Telkom Kenya and Jamii Telecoms. Last week Telkom and AccessKenya doubled their clients’ bandwidth without raising prices, sparking a similar price war within the residential sector.

KDN Marketing Manager Vincent Wang’ombe commented: ‘From our experience, a reduction in internet prices increases usage, and this is why we will be lowering our prices before the end of October, so as to utilise both our international and local capacity. We have un-utilised capacity that we are paying for whether we use it or not’. The current spate of price cuts have been made possible by the respective arrivals of international submarine cables TEAMS, SEACOM and EASSy since June 2009. The cables are hoped to cut operators’ reliance on expensive satellite connections, and reduce the cost of broadband from USD2,500 per megabyte to USD200.

In other news, Kenyan Finance Minister Uhuru Kenyatta has approved Safaricom’s acquisition of two data operators – IGO Wireless and Instaconnect – which was first mooted in July 2010. IGO Wireless operates a fixed wireless data service and holds a WiMAX licence, whilst Instaconnect integrates data solutions for clients. Both companies operate under the same management team. Safaricom CEO Michael Joseph commented: ‘[The approval] officially gives us a go ahead to conclude the purchase agreements and take over commercial operations of the acquired companies. The acquisition of IGO Wireless and Instaconnect allows us to expand our data infrastructure, but there is still a significant shortage of essential frequency spectrum necessary for wide scale deployment of wireless data networks’.

According to TeleGeography’s GlobalComms Database, eight companies in Kenya hold WiMAX frequencies; now that the acquisition of IGO Wireless has been approved, Safaricom will own three of them. Safaricom’s first acquisition was a 51% stake in WiMAX provider One Communications in August 2008. This was followed a year later, in August 2009, with a 100% acquisition of wireless internet provider Packet Stream Data Networks. Joseph has hinted that Safaricom is still keen to secure additional WiMAX frequencies in order to maximise its data business. The firm recently created a new department – labelled ‘Strategy and New Business Development’ – charged with establishing buyout opportunities within the data market.