Safaricom opts to go it alone in high speed Internet plan

Telecoms operator Safaricom will start work on its advanced fourth generation network (4G) technology in two weeks, aiming to deliver high-speed wireless Internet in a year’s time, the company’s chief executive Bob Collymore has said.

The move effectively means Safaricom is out of the government-backed national 4G joint venture network that has been on the cards in the past two years.

Work on the network, known to have download speeds of up to 10 times the 3G network currently in use, will start as soon as Safaricom signs the Sh14.9 billion security communication contract with the government in two weeks’ time, giving it access to additional frequencies, Mr Collymore said. (SEE VIDEO)

The 4G network is the latest GSM technology that has become popular with wireless telecoms operators world-wide. In addition to high-speed Internet, the technology offers improved video streaming capacity that can aid the work of heavy consumers such as hospitals practising telemedicine. 

Mr Collymore said Safaricom will use some of the frequencies it is getting from the State as part of the security communication deal to build the advanced network, gaining competitive advantage against its rivals.

Safaricom plans to deploy two separate 4G networks using the newly acquired frequencies – one for the security communication in Nairobi and Mombasa and the other for its commercial activities in 15 cities.

“We are going to roll out two Long Term Evolution (LTE) networks in the next 12 months — one for government covering Nairobi and Mombasa and a commercial one covering 15 major towns,” Mr Collymore said in an interview. 

Mr Collymore cited the slow pace at which the joint 4G initiative is progressing as the reason for Safaricom’s exit, adding that the telecoms operator, which is Kenya’s most profitable company, has completed laying fibre optic cable in Nairobi that allows it to upgrade its 2G and 3G sites to LTE networks (4G).

“We have decided to go it alone because we are not seeing the feasibility of a joint network that the government has been talking about for the past two years,” he said.

Deployment of a commercial 4G network would give Safaricom a first-to-market advantage ahead of its rivals Airtel and Telkom Kenya Orange.

The deployment also comes as Safaricom bets big on data and seeks to cut reliance on voice revenue, whose growth has nearly flattened out in recent years.

Safaricom’s half-year results covering the six months to September 31 indicate that voice contributed 55 per cent of the telecom firm’s Sh79.3 billion revenue while non-voice accounted for 40 per cent. 

“Data is the fastest growing sector and we will continue investing in this market segment with the roll-out of fibre, network upgrade and partnerships with handsets manufacturers to provide affordable smartphones,” Mr Collymore said.

Safaricom’s change of tack comes against the backdrop of the government’s promise to spearhead the deployment of a joint industry mobile broadband network.

“The draft policy has suggested a joint industry roll-out of the high-speed Internet through a government-led open access initiative, that will result in provision of broadband connectivity to the entire country and meets the targets set in the National Broadband Strategy,” Fred Matiang’i, the ICT  secretary, in an earlier interview.

In June, the Communications Authority of Kenya (CAK) told the National Assembly’s departmental committee on administration and national security that it had agreed to waive the fees for a private 4G network as part of a wider plan to reduce the cost of the multi-billion-shilling security deal awarded to Safaricom.

Francis Wangusi, the CA director-general, also told MPs that the security system that Safaricom is building for the government would run on a 4G network and that the broadband will allow CCTVs to relay video footage.

“It will be an independent network that is exclusive to the police and is delinked from Safaricom’s commercial network,” Mr Wangusi said.

Under the agreement, Safaricom is required to develop a system for surveillance, analytics, command and control of police operations in Nairobi and Mombasa.

The agreement with the government indicates that the infrastructure on which the security system will run belongs to the National Police Service, and Safaricom is therefore undertaking the work on a build, operate and transfer model that will see the police take ownership of the network upon expiry of the agreed contract period.

Safaricom has promised to incur the capital expense needed to set up the network upfront and get paid by the government on an annual basis once the system is operational. Payment starts a year after police start using the facility.

The exit of Safaricom from the government led 4G network deals a big blow to the promoters of a national 4G network because it is one of the few firms among those who expressed interest in the joint venture that have the financial muscle needed for the rollout.

The joint 4G ownership structure is modelled on a public private partnership, where the government and the operators – including foreign firms – will own stakes in the network equivalent to the capital they inject in the yet-to-be-established special purpose vehicle.

The Treasury in 2012 approved the ownership structure of the advanced network that needed the operators to invest Sh10 billion to start construction. The government was to offer frequencies for a stake in the business.

The list of operators who expressed interest in the joint venture included Airtel, Orange, MTN Business and Liquid Telecoms. The deal was also expected to provide a business opportunity for hardware vendors such as Ericsson, Huawei and Alcatel-Lucent.

African telecom giants MTN and Vodacom are already running trials in South Africa and Safaricom has also been testing the technology.

Statistics show that there is a growing uptake of faster internet or broadband subscriptions in Kenya, including mobile modems and 3G subscriptions, which rose to 2.9 million in the year to June up from 2.3 million subscriptions recorded in the last quarter.