Zuku rides on high demand for broadband

Market watchers have linked the success of cable TV provider, Zuku, to growing demand for high broadband internet access in the regional market where mobile phones have generally choked out fixed wire networks.

A new report says that Zuku, which is owned by Wananchi Group, has shown remarkable resilience in shaking off fierce competition from mobile phone companies.

It notes the low bandwidth internet access provided by mobile phone companies has played a major role in pushing up demand for high broadband access within residential areas and among businesses, handing Zuku a lifeline.

“Historically, fixed broadband was perceived in Africa as a privilege of the enterprise market or a few residential areas, but Zuku has effectively challenged this perception by indicating a growing demand for fixed broadband in the residential market,” it notes.

The report, which was prepared by reportlinker.com and is sold by Analysys Mason, says broadband providers have found it worthwhile to build networks for customers in geographically concentrated areas where they are able to generate more per connection, resulting in higher margins.

Among the broadband providers that focus on the corporate market include Dark Fibre Africa, Liquid Telecom and MTN Business.

The report says Zuku’s success has been replicated in other countries where residential users are being connected with fibre or cable rather than the incumbents’ copper.

“The Zuku Triple Play offering-broadband, TV and voice over HFC cable is a leading example of what is possible,’’ it says.

“Zuku has streamlined its installation and operations to offer a service that has reasonable pricing at a relatively small premium to mobile broadband offerings at between Sh3,000 to Sh4,000 monthly compared to all-you-can-eat mobile offers at around Sh2,000 for internet access only,” it adds.

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Good coverage of most of the affluent suburbs in Nairobi and use of an economically attractive penetration model saw Zuku sign up 30 per cent more homes by the end of 2013.

The report notes that where the traditional fixed telephone companies heavily relied on the assumption that high barriers to entry would protect them from competition in fixed residential broadband, had been disproved with the entry of the fibre optic based providers like Zuku.

Heavy investments in deployment of fibre networks in recent years within the central business district and now into buildings has reduced the private fixed broadband reliance on the traditional fixed networks.