Safaricom entry to shake homes Internet market

The move will widen Safaricom internet services such as larger capacity, video conferencing and television viewing, services that the mobile telephony firm cannot offer using its current modem platform.

Safaricom also has WiMax frequencies—wireless internet—to connect homes, but the limited frequencies has slowed wide scale deployment of wireless data networks.

This will place it in a head to head battle with Access Kenya for control of the homes internet market that has attracted other internet firms such as Wanainchi, Telkom Kenya and Swift global.

“Jamii has been our major partner and we are aware that they are laying the cables to connect home users and Safaricom is weighing its options,” Bob Collymore, the CEO of Safaricom told the Business Daily in an interview.

The Sh1.2 billion connection of households to the inland and undersea fibre optic cable by Jamii Telecom will be the first in the market as players have tendered to connect to households using landline copper cable, modems and Wimax frequencies.

WiMax is a form of wireless digital communication that allows users to access broadband Internet from a 50km radius for fixed stations and five to 15km for mobile stations.

Access Kenya uses Wimax to connect homes to the internet while Telkom Kenya has been using the copper cable to offer the service, but it has remained sluggish as most home users turned to the mobile phone network.

Jamii is targeting high- end neighbourhoods such Karen, Lavington and Kileleshwa due to the high purchasing power and growing appetite for internet use.

It will also roll out in Mombasa, Nakuru, Eldoret and Kisumu

At present, Safaricom has been using Jamii’s inland fibre optic cable that have ringed major urban centres such as Mombasa, Nairobi and Kisumu, which it uses to serve its corporate clients in the voice and internet market.

Safaricom uses modems targeting the highly mobile individuals but is limited in its offering.

The Jamii platform will sharpen Safaricom’s competitive edge in the internet market at a time when it is racing to reduce dependence on the voice market that is gripped by price wars.

The listed mobile telephony firm is now looking at the data business to maintain its profitability.

The cost of voice calls fell to a low of Sh1 last week after Safaricom rival Airtel cut prices from Sh3 per minute, which come down from about Sh6 in August, more than halving each subscriber’s monthly budget for airtime.

This has seen Safaricom intensify its activities in this segment of the business by buying rival Internet firms to give it a head start and boost its frequencies capacity.

The country is faced with a shortage of the WiMax frequencies, making the fibre network a key plank in the internet firms expansion plans.

Analysts reckon that AccessKenya is set to take the biggest hit from the entry of Safaricom and other players into this market because unlike its rivals, it does not offer other extra services.

For instance, Wananchi, through Zuku, offer much more than Internet connectivity — they offer television as well.

“Home connections are a key competitive advantage for AccessKenya and we see this threat to the stock,” said African Alliance of Jamii’s plan.

The threats come at a time when AccessKenya issued a profit alert and warned that its 2010 full year results would be 25 per cent lower than the previous year’s on reduced revenues due to the price war.

AccessKenya sales dropped to Sh876 million from Sh1.06 billion in the first half due to the price undercutting that saw the firm lower its prices in effort to remain relevant in the increasingly competitive market place.

Its other competitors in the data include Swift Global, Kenya Data Networks, Uunet and the Wananchi Group, which have intensified their activities in the market place in recent months.

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