Telkom Kenya (operator of the Orange brand) CEO Mickael Ghossein speaks to How we made it in Africa’s Regina Ekiru about the state of the industry, challenges and the way forward.
You had earlier raised questions over the readiness of Kenya to adopt mobile number portability (MNP), which kicked off on 1 April. What is your take now?
After the launch of MNP, we experienced ‘peanut’ movements that have not impacted our customer numbers significantly. MNP will be successful among corporate clients but not for individuals. Customers would ordinarily switch networks based on price, service and quality. Prices today are very low and each operator has strength in quality and good services. I still believe that this would have been more successful before the price cuts.
Telkom Kenya has been a casualty of vandalism of its cable infrastructure. How has this affected the company?
The constant cut offs by vandals has damaged our reputation among our clients. We encounter between 40 to 50 cable cuts every month, which affect more than 10,000 clients. To repair this takes time and consequently customers are dissatisfied with having to be off the network for hours. We estimate losses of between Ksh.50 million to Ksh.100 million every month from vandalism and sabotage. Until a law is passed to introduce stiffer penalties, the vice will go on.
What challenges does Kenya’s telecoms industry face?
Sustainability is a big challenge to sector growth due to low call rates that have diminished voice revenues. The huge expenses needed to maintain quality and regulations have not favoured growth in the sector. All four operators have either recorded reduced revenues or recorded losses in the last one year. The sector has lost money. Price cuts are good for customers, bad for operators since they are not sustainable and bad for Kenyans since operators will be reluctant to spend more on innovation. Last year’s price war led to call rates being slashed by 50%, leading to a sharp fall in the Average Revenue Per User (ARPU). Since September 2010, when the price cuts were initiated, Telkom Kenya has made potential losses of about Ksh.2 billion.
How does the Kenyan market compare with other East African countries?
Kenya is by all means a difficult market for telcos to operate in compared to other East African countries. We are, however, optimistic that in five years Telkom Kenya will be listed at the Nairobi Stock Exchange (NSE). We are pushing quality and improving our public image and we believe this will pay off. To attract investors we need to be sustainable. This for us has not been consistent but we are working towards it.
What are your projections for the year ahead?
The challenges facing the sector have been compounded by double-digit inflation and an increase in food and fuel prices, which are expected to affect this year’s performance. We need regulations that will help us manage costs and make revenues. We have hopes that this year we will register slight growth compared to last year, depending on market dynamics and the roll out of our 3G network.
Speaking of the 3G network, when are you likely to launch?
We are not in a hurry to launch. We are still testing our network quality, speed and customer care support. We have invested over €40 million in our 3G network. We are firmly on course to launch the most reliable and robust 3G network in Kenya and believe this will provide an innovation platform to ensure that we maintain the positive momentum in the growth over the coming months.
You recently almost doubled your customer numbers. What tactics are you deploying to sustain this growth?
We grew our mobile subscriber base from 1,160,534 in October 2010, to 2,133,462 in December 2010. I would attribute this growth to increased customer confidence, an efficient distribution network, affordable pricing and special offers. We are focusing on increasing our coverage, value addition, distribution and customer care service. To boost our customer care service and ensure customer satisfaction, we have 250 customer care personnel, both in-house and outsourced. We are, however, not so keen on number of customers only. Kenya has about 24 million [SIM] cards, yet only 11 to 12 million are in the hands of active customers. Having a huge database of clients does not determine your revenues. We are excited that more than 50% of our customers are active.
What can be done to ensure growth in the industry?
Kenya’s telecommunications sector will only thrive if the government and stakeholders make strategic moves to counter the drop in revenues sparked off by a fierce price war initiated last September. I would also recommend the adoption of an open door policy that will see operators share tower and cable infrastructure so as to reduce expenditure and tighten security. Partnerships will help us cut down on costs, improve our profitability and thereby invest more in innovation. I support the recommendations of a Central Bank of Kenya (CBK) task force that concluded mobile operators should share mobile money transfer agents. We should share agents because the truth of the matter is it is happening. Though agents may have signed contracts to sell only one operator’s products, they do sell the competitors’ products under the table. We just need to make it official now. With price wars, dealers have lesser revenues and cannot keep allegiance to one operator. This will improve distribution and increase access to services for our customers.