Telkom loses landline users in shift to mobile phones

Telkom Kenya has lost 52.7 per cent of its fixed landline subscribers in the 12 months to September 2012 due to changing consumer preferences and copper vandalism.

The latest data from the industry regulator, the Communications Commission of Kenya (CCK), indicates that the number of fixed landlines declined to 70,390 in September last year from 148,816 in a similar period in 2011.

In the wireless fixed lines segment, where Telkom Kenya provides the services through CDMA technology, the number of subscribers declined to117,910 in September 2012 up from 141,580 the previous year.

The landline business has been hit by the growth in the mobile telephone business, which commands nearly 30 million subscribers from 1.3 million in 2002.

“The decline is a reflection of the continuous trend of fixed-to-mobile substitution,” said CCK in the report.

“High maintenance costs of the fixed line as a result of continued vandalism could also have contributed to this decline.” said CCK in its report,” said CCK in the report.

Telkom Kenya CEO Mickael Ghossein told the Business Daily that vandalism cost the firm Sh2 billion annually and the operator is now turning to fibre lines within parts of Nairobi.

Stiff competition

“We recently completed the change-over in Nairobi’s Upper Hill area. This switch will improve quality of service to our customers, a clear indicator that we are in this business for the long-term,” said Mr Ghossein.

Telkom Kenya is also facing a stiff competition in the voice and Internet market segments.

Orange trails voice rivals Safaricom, Airtel and yu with its market share based on traffic having stood at 1.1 per cent in September, according to the CCK. 

Safaricom had 76.7 per cent while Airtel and yu stakes stood at 12.5 per cent and 9.6 per cent in that order.

In the data market, Telkom has lost top position to Wananchi Group and AccessKenya, deepening its losses when combined with the operator’s poor show in the voice and fixed line market.

(Read: Telkom Kenya rules out following rivals in raising call rates)

Telkom made Sh9.2 billion in revenues in 2011 and returned losses of Sh18 billion in what its management blamed on the price war in the voice calls market that saw tariffs drop by half in 2010.

In 2008, the French had hoped to return Telkom Kenya to profitability by end of 2011 but this was scuttled by the sudden deep cuts in call costs and its ultimate impact on revenues.

More recently, the huge losses forced the telco to rely on shareholder and bank loans, a mode of operation that raised its interest expenses to nearly half the revenues after it paid Sh4.7 billion in 2011 to its lenders.