Safaricom delays 5G network

Safaricom #ticker:SCOM has put on ice plans to launch Kenya’s first fifth-generation (5G) mobile internet services in a retreat that will see the telco focus on growing 4G network in the race to boost data use.

Peter Ndegwa, the Safaricom CEO, says there is no plan to launch the 5G network in the short-term, adding that the telco’s immediate plan is to convert millions of 2G and 3G users to 4G.

The firm had completed testing and trial for the 5G superfast internet service and planned to switch major urban centres to the service before end of this month.

Safaricom’s 5G network was being built by Huawei, which Washington has accused of working at the behest of Beijing.

Safaricom is aiming to rev up its data business to offset sluggish growth in mobile calls, where it has seen a small revenue growth due to saturation, forcing the firm to turn to M-Pesa and internet to power growth.

“We have tested it (5G) in this country. We will go through conversations around spectrum with government in the background. But in terms of immediacy, we are not intending at this stage to go big on 5G in the near term,” said Mr Ndegwa.

“There is still so much headroom for us to exploit and fully utilise 4G before we go into 5G.”

The 5G service was tapped as a central part of Safaricom’s attempts to further expand its data business to counter slower growth in voice calls revenue and capitalise on burgeoning mobile internet use in the country.

Chipmaker Qualcomm has indicated that 5G could achieve browsing and download speeds about 10 to 20 times faster than those offered through 4G.

That would allow a consumer to download a high-definition film in a minute or so. Mobile gamers will also notice less delay - or latency - when pressing a button on a controller and seeing the effect on screen.

Similarly, mobile videos should be near instantaneous and glitch-free while video calls would become clearer and less jerky under the 5G network.

This is the market that Safaricom is eyeing in the firm’s quest to increase sales from its data division. Safaricom did not disclose the billions of shillings required for the 5G rollout.

The freeze on additional investments on the superfast internet services comes as Safaricom and its parent company, Vodacom, engage high gear in search for debt to finance their expansion into Ethiopia.

They have an agreement to borrow up to $500 million (Sh55 billion) from America’s sovereign wealth fund, US International Development Finance Corporation, for Ethiopia bid.

The 5G commercial launch would have followed the December 2015 unveiling of the 4G network, which has helped Safaricom grow its revenues from data to Sh40.7 billion at the end of March from Sh9.3 billion in 2014.

Safaricom said 77 percent of Kenya’s population had been covered by 4G base stations—at 4,342— at the end of March. It had 5,314 2G base stations and 5,275 were 3G.

The firm has experienced an increase in data traffic as people work from home and students turn to e-learning during the Covid-19 pandemic.

Now, the telco has launched a credit scheme in partnership with Google where its subscribers make daily payments of as little as Sh20 a day for up to a year to acquire a smartphone.

The plan, which aims to convert about four million 2G and 3G-enabled phones to 4G, seeks to ramp up data usage and revenues.

Safaricom got entangled in the tensions between the US and China over Huawei’s contract for the 5G rollout.

The US says that global security and personal data will be at risk if the Chinese company dominates development of the world’s fifth-generation internet.

Huawei rejects the US campaign and has called on Washington to produce more evidence to prove the risks purportedly posed by the company.

It is not certain whether involving Huawei in Safaricom’s 5G network emerged in talks on a free trade agreement between the US and Kenya, analysts said.

Kenya and the US formally launched negotiations on July 8 for a bilateral trade pact that the two economies hope could serve as a model for additional agreements across Africa.

In June, Britain announced it was reversing the decision to let Huawei participate in its 5G network following pressure from the US.

It ordered a ban on the Chinese firm’s equipment from its fifth generation networks by the end of 2027.