Telkom Kenya raises data spend, cuts focus on voice

Telkom Kenya will reduce the pace of investment on the voice business as it invests the bulk of Sh7.1 billion in data in the race to return the previously State-owned firm to profitability.

Mickael Ghossein, the CEO of Telkom, said that the firm would partner with various content providers and local universities to develop software applications that its subscribers can use to conduct electronic commerce, book hotels online, and seek medical care.

It will also invest in infrastructure to support wireless Internet connection to capture growing demand from smartphone and tablet computer users through high-speed services.

“The pipes we have are like a supermarket, to draw users into the store you need commodities and that is the area we are focusing on right now,” said Mr Ghossein. “We are going to give much focus to data because right now we are selling voice at a loss, but this doesn’t mean we will stop investing in voice,” added Mr Ghossein.

This strategy is in line with that of its parent company, France Telecom, which is that growth in Africa will be driven by data as countries mature in terms of voice and SMS.

Telkom Kenya is 49 per cent owned by the Kenya government while France telecom owns the remaining 51 per cent, which it acquired in December 2007.

Telkom Kenya has sunk deeper into losses with its management blaming the price war, which saw tariffs in the mobile telephony market drop by half in 2010, for its woes.

In 2010, Telkom Kenya made a net loss of Sh4.3 billion on revenues of Sh10 billion. The French had hoped to return Telkom Kenya to profitability in 2011, but this was scuttled by the Communication Commission of Kenya’s decision to cut the mobile tariff rate (MTR) that operators charge each other for interconnecting customers through networks by half to Sh2.21 on July 1, 2010.

At the time, mobile networks were charging customers a minimum of Sh8 per minute, but this has since dropped to an average of Sh4.
Africa has many lower-end users who only make calls and send text messages, but its increasingly young and tech-savvy population is buying high-end handsets that are increasing data usage across the continent.

As a result, mobile operators across the continent are investing billions of shillings on network upgrades that support high-speed wireless services to capture consumers who are increasingly using tablet computers and smartphones to surf the web.