Prasanta Das Sarma, Managing Director, Airtel Kenya; Bob Collymore, CEO, Safaricom; Aldo Mareuse, CEO, Telkom Kenya: Interview

Interview: Prasanta Das Sarma, Bob Collymore and Aldo Mareuse

In what ways can mobile operators encourage higher levels of data consumption?

PRASANTA DAS SARMA: Data consumption is still the main driver of telecoms revenue growth around the globe. Mobile operators can continue to propagate their networks by expanding 3G coverage, rolling out 4G where it is possible, and introducing more cost effective devices and solutions. Because customers can be wary of low cost devices, the goal is to introduce affordable devices that are still of good quality. Additionally, we are trying to reduce the cost of data, and we do that by encouraging the use of bundles. Prices for pay-as-you-go are already quite low, but as consumption per user continues to increase, low-priced bundles have become even more important.

BOB COLLYMORE: We are focusing on access – getting the internet to as many people as possible. This seems very obvious, but the end result means investment in the network. As a company, it is our aim to be consistently ahead of the curve by investing in the network in order to attract people. The other side of this picture is developing content. Kenyans, particularly young Kenyans, are very quick to take up new content. Of course they visit global content like Facebook, Twitter and so on, but we have also noticed that there is a great demand for localised content. This can mean educational materials or entertainment, for example. Access and content can be the main drivers encouraging data consumption.

People often think only about cost and tell us we need to lower prices, but at the same time this is one of the most expensive areas in the world to roll out these types of services. We are not charging a premium for 4G – we are pricing it at about the same as you would price 2G. The customer often views it as just the internet, so price is a barrier.

Over the last year, we have dropped our prices substantially in line with today’s competitive market. Additionally, making data access available in very small bundles is important. Our market is one where consumers buy data bundles as low as 15 MB per day so keeping a large variety of bundles that a consumer can choose from is crucial.

ALDO MAREUSE: We need to provide better value and products to the customer to match their needs. In order to do this, we need to be more efficient. Obviously, implementing 4G would play a large part because the spectrum is much more superior in the delivery of service. We also need the average cost of devices to fall significantly, especially when we are looking at catering to the lower end of the market. Bundling packages is of course part of the game as well. Voice services are already well developed in the market; data services however are still underserved. So while we see the importance of bundling, we also see a very clear opportunity to further expand our services in the data market.

How would you characterise the levels of competition in the telecoms sector?

MAREUSE: The sector in Kenya, in its current state, is not conducive for competition. And as much as no operator should be blamed for this situation, regulation is needed to grow the sector to an efficient and competitive level. Moreover, industry players are waiting for the findings of the study currently being undertaken within the telecommunications sector, by the Industry Regulator, the Communications Authority of Kenya, to establish the level of competition in the market. We will be keen to see how the regulator will implement the report’s findings. Mobile money has also played a primary role in increasing the level of difficulty for operators to compete within the market.

I believe that we need to have a more even playing field, so that all mobile operators can offer their financial services in a profitable way. Interoperability should also be a focal point of the market study.

COLLYMORE: The telecoms sector is very competitive in Kenya and while we occupy the leading market position, we are not free to do whatever we want. We have to be very attentive to what our competitors are doing, especially in terms of pricing for data – that is where the battleground is.

The data market is quite fractured. Apart from mobile data, you have lots of fixed-data options coming up in addition to Wi-Fi options. From a competitive perspective, the market is very alive.

Customers tend to look only at the bundle of services and the price. This is how they make their decisions on which operator they are going to use. We are always running pilot programmes to determine the optimum levels of pricing that are most attractive to consumers throughout the country.

SARMA: Competition has not changed much in the past few years. The regulator has made several efforts to act on market dominance by doing research on the topic; however, the study was scrapped and a new bill was hurriedly introduced that stripped the regulator of some of its power.

Now the regulator might not be as empowered as it should be. We are hopeful, however, as the new cabinet secretary knows the sector very well, knows the issues, and has a very balanced and open approach to telecoms. We are hopeful this will encourage significantly more investment. Kenya is unique in telecoms value addition thanks to mobile money. This is the main barrier to competition in the marketplace, as it prevents others from entering. One option to address this problem could be mandatory interoperability, such as is done in Tanzania and Rwanda, and this could help create a more competitive atmosphere around mobile money. Additional value-added services are on equal footing with markets, but mobile money is the crucial focal point. Scale is critical as it allows you to reinvest, so the issue of market dominance requires greater regulatory solutions.

To what extent is network reliability continuing to pose a challenge in Kenya?

COLLYMORE: The penalties are very high, and this is money that could otherwise be used to improve services. In my opinion this in not helpful for our customers. We have had challenges with the applied methodology and how quality of service (QoS) is measured, and the regulators have now begun to change the process of how the measurement is done. They have a “report card” system where they measure QoS over a period of one year and give you an analysis. This system, however, really does not help the customer because it is after the fact. We would prefer a collaborative approach between operators, the regulator and stakeholders.

As a mobile network operator, if there is bad service, we do not make as much money when calls are less likely to go through – a situation that is not beneficial for any party involved.

MAREUSE: The issue regarding QoS revolves around returns. Operators attempt to put as much traffic as possible on their networks, and if you have too much traffic on these networks, they become overloaded and the quality of service will suffer. As you get new technology such as 4G where spectrum is more efficient, customers will be able to get better quality.

SARMA: Kenya currently has the best network reliability in all of Africa due to secure power sources and substantial network reach. Reliability can of course always be improved, and the spectrum can only carry so much traffic.

There have been efforts to build out the density of networks in order to improve reliability this year, and network quality is getting better. The penalties from the regulator are not an incentive to anyone, as telecoms would prefer to spend the money on improving the network instead. This can constrain new investment if companies are paying punitive fees instead of putting this money to better use.