Telcom firms cut investments in data, voice infrastructure
Mobile operators have been upgrading their 2G network to 3G which offers relatively faster Interned speeds, although they have now cut back investment in voice and data infrastructure. PHOTO | FILE
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The move could lead to congestion of the firms’ networks and further worsen their quality of service record.
The Communications Authority of Kenya last year found Safaricom, Airtel and Telkom Kenya, which operates the Orange brand, to have substandard service.
Consumers are likely to be the hardest hit by the decision by the operators to scale down on their investment, with previous CA report on quality of services showing that none of the operators was complaint.
Mobile operators have scaled back their investment in voice and data infrastructure despite a major increase in subscriber numbers, according to a latest sector report by the Communications Authority of Kenya (CA).
The move could lead to congestion of the firms’ networks and further worsen their quality of service record.
The regulator last year found Safaricom, Airtel and Telkom Kenya, which operates the Orange brand, to have substandard service.
The report for the quarter ended December shows that the operators spent Sh30 billion in 2013 to establish and upgrade their voice networks, Sh3.5 billion less compared to the previous year.
This is the second consecutive cutback in the capital-intensive sector, a move that could either signal cheaper cost of new technologies or that the operators believe their current level of investment is sufficient to support their customer base.
Investment by the telecommunication firms in voice services last peaked at Sh34.5 billion in 2011, following the all-time high of Sh40.2 billion in 2009 when most of the investment was associated with rollout of masts across the country.
The operators spent even less on data infrastructure at Sh3.5 billion in 2013, nearly halving the previous year’s investment of Sh6.1 billion. The firms have been upgrading their 2G network to 3G which offers relatively faster Interned speeds.
Reduced capital spending came as the number of subscribers increased significantly in the quarter ended December and it remains to be seen whether the divergence in investment and customer growth will lead to poorer quality of service.
Mobile subscriptions rose to 33.6 million in the quarter, up from 32.8 million registered during the previous three-month period. That of Internet subscriptions increased to 26.1 million from 23.2 million in the same period.
Consumers are likely to be the hardest hit by the decision by the operators to scale down on their investment, with previous CA report on quality of services showing that none of the operators was complaint.
The CA expects the operator to achieve a score of 80 per cent on the eight indicators including speech quality, completed calls, call success rates and call drop rate.
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 rating.
The scaling down of investment follows stiff competition in the sector that has seen only Safaricom turn a profit.
A major cut on investment in the sector was witnessed in the year 2010 at the height of tariff price wars that saw the calling rates come down by more than 50 per cent, with the total amount spent by the operators during that year declining to Sh27 billion from Sh40 billion in the previous year.
The CA report shows that operators’ revenues increased significantly, implying improved margins in the wake of reduce capital spending.
Revenues from voice services –the most important segment— rose to Sh140.2 billion in 2013 or five per cent higher compared to the previous year’s Sh133.5 billion.
Data revenues, however, dropped for the first time to Sh21.9 billion representing a 14.4 per cent contraction compared to Sh25.6 billion in 2012.
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