Bleeding Airtel Kenya finally strikes the right ringtone

Airtel officials at the opening of a retail outlet in Nairobi. The firm, owned by India’s Bharti Airtel will host Finserve Africa, Zioncell Kenya and Mobile Pay under the Application Service Provider.

By WINSLEY MASESE

NAIROBI, KENYA: Mobile phone operator Airtel emerged the biggest winner as the telecoms market embarks on a new journey of sharing infrastructure.

The industry regulator, the Communications Commission of Kenya (CCK) licensed three firms Equity Bank, through its subsidiary Finserve Africa Limited, Zioncell Kenya Limited and Mobile Pay Limited to operate as Mobile Virtual Network Operators (MVNO).  CCK also approved the three companies to piggyback on Airtel infrastructure to launch products and services.

Airtel will charge unspecified amounts for the three firms to lease its infrastructure. The MVNOs have to pay Sh100,000 to the regulator. Airtel, Kenya’s second largest mobile operator in subscriber numbers has been hit since 2010 when it waged a vicious price war in a bid to dent Safaricom’s market share. The upshot of this has been a dip in  industry profitability. 

The firm, owned by India’s Bharti Airtel will host the three companies under the Application Service Provider, in efforts to share infrastructure, which is a constitutional obligation. This appears as key strategy to take on market leader, Safaricom, away from the price wars that have seen firms bleed. The deal is a blessing in disguise for Airtel.

“If Airtel is carrying the services on a particular bandwidth such as voice service within the same, they might have two or more channels and that is the only way to make profit,” said CCK Director General Francis Wangusi.

INITIAL HURDLES

Zioncell Kenya Limited, owned by Mobile Decisioning (MoDe), is a technology company that provides mobile value added services to mobile network operators in emerging nations. Mobile Pay Limited runs the Tangaza mobile money transfer service, which is the only service provider that can give money to people who do not have an identity card because it uses a personal data assistant (PDA) machine to register customers’ details which include fingerprints.

With this licence, the firms can have their own SIM cards, with subscribers able to make calls. The firms can also enter the data market — said to be low hanging fruit waiting to be picked. The three new entrants can offer mobile money transfer services, cellular mobile voice, and data services.

However, the decision for the three companies to identify Airtel might have raised eyebrows among the other mobile network operators. “There is a mobile operator that asked the regulator on the criteria used to have Airtel host the companies,” said Wangusi.

Equity Bank was expected to use Essar Telkom’s network infrastructure, a mutually beneficial agreement as Essar was also seeking additional funds to roll out a 3G network. However, this arrangement is now not feasible due to the pending acquisition of yuMobile’s network infrastructure by Safaricom. It is also unlikely that Safaricom would want to partner with one of the largest banks in Eastern Africa that could challenge its M-Pesa innovation.

“The bank’s entry into the telecommunications sector will be a challenge at first, but it is expected that once initial hurdles, such as regulatory approvals, mode of delivery of services either through use of SIM cards or native mobile applications, identifying the correct partners for their agent and network infrastructure to name a few, are overcome, the bank might start pushing for market share in the targeted niche market of mobile money services,” said Leonard Kore and Spiwe Chireka, analysts at telecoms research firm International Data Corporation (IDC).

While the analysts see the mobile transfer and payments market as a promising market segment for the bank and the MVNO operators, the real fight for market share will be on mobile payments of goods and services (in particular utility bills and daily basic commodities), and integration with bank accounts to facilitate deposits and lending.

Kenyan subscribers have a low propensity to switch mobile service providers even when offered lower tariffs. The telco market is already fiercely competitive, with customers more often than not preferring value over price when making purchasing decisions. This, therefore, provides a sound market opportunity for MVNOs offering value-added services such as mobile money and mobile-based retail transactions.

The analysts say the key value propositions to be offered as they roll out their MVNO strategy should be mobile money and e-payments, with competitive pricing points, widespread access and availability of agents.

PRICE WARS

Equity also possesses the financial muscle to wage potential price wars with other competitors and also resonates as a strong brand with millions of Kenyans. The significant increase in online payment transactions in the Kenyan market has created a new attractive battlefront for potential e-payment solutions providers.

“Equity Bank and future MVNOs will have to start offering their own web-based payment gateways and/or solutions so as to capitalise on the growing electronic payment opportunities presented by the e-commerce sector in Kenya,” IDC said.

Mr Peter Wanyonyi, a telecoms analyst, says the firms’ entry into MVNO segment, are reacting to perceived low quality of service. “There have been unsubstantiated allegations that some telcos slow down competing money transactions carried out on their networks by banks and other possible competitors,” he said.

Hence, to strategically position themselves in the market, the MVNOs will need to own networks, or at least lease and operate networks virtually, to maximise the appeal of their offerings.

“The M-Shwari service is a big threat to banks like Equity, whose target clientele is the same as that targeted by M-Shwari. It, therefore, follows that such banks will want to have their own networks to rival Safaricom on its own turf — technology — just like Safaricom has brought the game to the banks on their own turf — money transfer and banking,” Mr Wanyonyi added.