Corporate

Equity gets special window to enter mobile telecoms market

The Communications Authority of Kenya (formerly CCK) headquarters in Nairobi.Photo/FILE
The Communications Authority of Kenya (formerly CCK) headquarters in Nairobi.Photo/FILE 

Three new service providers are expected to enter the telecoms market on Friday morning, opening a new front in the battle for control of mobile money and data service that have become the fastest-growing revenue streams for the four existing operators.

The three operators to be licensed under a new legal regime will ride on existing operators’ networks to offer select services after signing agreements with the infrastructure owners.

The three firms to be issued with the Mobile Virtual Network Operator (MVNO) licences are Finserve Africa Limited, a subsidiary of Equity Bank, Mobile Pay Limited, owned by Tangaza Money, and Zioncell Kenya.

MVNO licences fall under the Application Service Provider (ASP) category, which comes with a fee of Sh100,000 and enables an entity to offer services such as customer registration, SIM card issuance, billing and customer care to end users without holding a spectrum licence.

This means that the three firms will ride on the existing infrastructure of the mobile operators at a fee to offer their services, saving them the pain of heavy capital expenditure associated with rolling out telecommunication networks and which the regulator says will promote competition.

But Telkom Kenya’s chief executive Mikhael Ghossein said his company will not allow the MVNOs on its network to offer voice or data services because this would compromise the quality of services.

Mr Ghossein had instead asked the Communications Authority of Kenya (CAK) to convene a stakeholders’ meeting before licensing the MVNOs.

“We have heard from the press that the regulator intends to license MVNOs. We will not allow any MVNO on our network to offer voice and data,” he said, adding that Orange was ready to work with them if they are coming on board to add value to the existing services.

CAK director-general Francis Wangusi, however, said all the three applicants had sought to use Airtel’s Network and that Telkom had nothing to worry about.

Kenya has not had a legal provision for infrastructure sharing, leaving the operators to sign independent partnership agreements with interested parties.

The regulator had last month demanded that Safaricom accept hosting the MVNOs as part of the conditions for the planned acquisition of yuMobile’s assets — signalling the regulator’s intention to make infrastructure sharing mandatory.

“Safaricom must submit to the authority, for approval, a framework of hosting Mobile Virtual Network Operators (MVNOs), indicating the numbers to be hosted and timelines,” the CAK had said in its letter to the telecoms operator.

Safaricom has not responded officially to the offer to buy yuMobile’s assets under the set conditions but its chief executive Bob Collymore has indicated that the company is no longer interested in the deal. 

Safaricom did not respond to our questions by the time of going to press.

Oscar Ikunu, the managing director of Tangaza Money, said having own SIM cards would enable the firm to offer voice, data and  mobile money transfer services — a deal that would practically turn them into competitors of the three licensed telecoms operators.

“We should be able to offer other value adds such as using the SIM cards to pay for goods and services besides facilitating cashless payment services in the transport sector,” he said.

Mr Ikunu said Tangaza Money was in the process of recruiting distributors and agents, creating new employment opportunities in the telecoms sector.

The CAK says licensing of MVNOs is expected to reduce the cost of serving each user and lower subscriber acquisition costs since the providers will buy minutes of usage wholesale from the existing network operators for onward sale to end users.

Telkom Kenya’s concerns are linked to a recent quality of service report indicating all the four telecoms operators — Safaricom, Airtel, Orange and yuMobile — had not met the minimum quality of service standards in the year to July 2013.

This represented a deterioration of service quality from the previous year when the smaller operators, Orange and Yu passed the test.

Safaricom, Airtel and yuMobile tied on a score of 50 per cent in the year to June while Telkom Kenya had a 62.5 per cent score.

In 2012, Safaricom had the worst score of 50 per cent while Airtel was rated at 62.5 per cent. Telkom and yuMobile both finished at 87.5 per cent.

The CAK attributed the drop in quality to the enhancement of the weight of the eight indicators, including speech quality, completed calls, call success rates and call drop rate.

The CAK has tied the renewal of Safaricom’s licence, which is due before June, to paying Sh2.3 billion and achieving the minimum quality standards.

The operators are currently fined Sh500,000 for breach of the quality of service standards and the State is looking to raise the fines, saying the current penalty is too lenient and has failed to enforce compliance.