Internet niche sees major shifts as telcos take over

Mobile operators are set to win the mass market internet war, riding on portable wireless solutions that are gaining ground among individual consumers and small businesses.

Analysts say traditional fixed line internet service providers (ISPs) are facing challenges in paving the way for mobile operators to drive the uptake of portable modems.

“The trend in the mass market favours mobile operators. People enjoy the advantage of mobility as opposed to fixed internet connections,” said Mr George Waweru, an analyst at Kestrel Capital.

The flexibility of accessing the internet anywhere through modems plugged into laptops or home computers is seen as a key selling point for telcos.

In addition, mobile operators charge per usage compared to fixed monthly subscription fees levied by traditional players.

The adoption of 3G — a superior data technology — among mobile operators is also expected to ease concerns over speed of plug-and-play connections.

Safaricom already has the technology and its rivals are expected to follow suit after the Communications Commission of Kenya (CCK) slashed the 3G licence fee from $25 million to $10 million.

The fortunes of listed players in the data market points to a gradual shift in the market where telcos are expected to take-over a larger share of the capital-intensive market, riding on their financial muscle and economies of scale.

Safaricom’s revenues from its data services reached Sh7.5 billion in 2009.

Analysts say that while overall internet penetration is still very low, mobile firms are in a better position to grow their market share, especially in the residential and small businesses market.

Access Kenya, whose market share in the corporate niche was estimated at 42 per cent in October 2009 by Renaissance Capital analysts, recorded a 54 per cent decline in net profits to stand at Sh34.5 million in the six months to June.

Revenues dropped Sh256.5 million to hit Sh805.8 million.

The Somen family – controlling 25 per cent of Access Kenya’s shares -- are reportedly open to a buyout if offered a healthy deal.

The major problem with home internet has been lack of frequencies to deploy more Wi-Max (wireless) internet infrastructure which is seen as more cost-effective compared to dedicated lines.

The scarcity of frequencies has made small Wi-Max providers a prime target of mobile firms seeking to expand their wireless internet footprint.