Safaricom, Airtel in joint venture to lay fibre cable
Fibre optic cable is laid out. Safaricom is seeking to connect 2,000 more homes to its fibre optic network by the end of the year in a bid to reduce reliance on voice business as a profit driver. FILE
Safaricom and Airtel will form a rare joint venture in the laying of a multi-million shilling fibre network to cut their reliance on third parties for wholesale internet and share the cost of building the inland network.
Both firms—which have been locked in the battle for control of Kenya’s telecom markets since 2000—are eyeing a larger share of the data market to grow profits and compensate for the flat revenues in the voice market.
This has called for the operators to invest in infrastructure such as fibre optics to offer faster and more efficient internet services at a moment when operators gear up to meet growing data demand from smartphone users and tablet computers.
The move by Airtel and Safaricom to lay own cable is set to hurt earnings of other carriers like Jamii Telecoms AccessKenya and Kenya Data Networks (KDN) that feed the two companies with wholesale internet.
Safaricom’s chief executive Bob Collymore told the Business Daily that it initiated talks with other operators including Telkom Kenya and Essar for the joint venture, but only Airtel took up the offer.
“We are going to roll out the fibre in the coming financial year, it will involve partnering with other mobile operators,” said Mr Collymore in a phone interview. “Safaricom and Airtel have a long standing Tower Sharing Agreement and we have similar agreements with Telkom Kenya and Essar.
Therefore, collaborating in fibre optic network deployment is an extension of this and will ensure that operators minimise costs while avoiding duplication, ” he said.
Airtel confirmed the joint venture, still at the discussion stage, but the two firms could not provide the length of the fibre, the cost of the network and what each firm will bring on the table as well as its management. The connection of Kenya to the undersea cable in July 2009 has spawned outsized investments on inland fibre networks from companies such as Kenya Power, Wananchi Online, Access Kenya, Telkom Kenya and KDN.
KDN, Telkom Kenya and Jamii have fibre networks in major urban centres. KDN and Jamii sell bandwidth to the telecom operators while Telkom Kenya is both a consumer and wholesale internet provider.
Safaricom expects a surge in demand for data services in Kenya, thanks to an explosion of Internet-ready, hand-held devices, an increase in the number of relevant applications and content.
It also sees Kenya positioned as a possible information technology hub for the rest of African continent as internet penetration gathers pace. The number of internet users in Kenya rose 95.6 per cent year-on-year to 17.4 million in the fourth quarter of 2011, thanks to an increase in mobile phone subscriptions, says data from the Communication Commission of Kenya.
Mobile phones are the main mode of accessing the internet in Kenya, adds CCK, and this has seen the mobile operators upgrade their networks to support high-speed wireless services as consumers use tablet computers and smartphones to surf the web.
Telkom Kenya and Airtel are rolling out broadband 3G networks now, but Safaricom is already testing its 4G network.
Mr Collymore said that its own fibre optic networks will not significant impact on its existing contracts with providers such as Jamii Telecoms Ltd and AccessKenya.
“We have mentioned in the past that the strategy remains one of “in filling” which means that we focus on building fibre in the areas that have no infrastructure whilst avoiding unnecessary duplication,” said Mr Collymore.
