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Rotary Club Strategic Telecoms Investment Opportunities

Rotary Club Strategic Telecoms Investment Opportunities. Richard Gitonga. Myths & Facts. Myth: The Telecommunications Industry is growing Fact: True, but ARPUs are declining. Myth: Safaricom is by far the most dominant player Fact: Yes, but only in the mass market retail segment.

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Rotary Club Strategic Telecoms Investment Opportunities

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  1. Rotary ClubStrategic Telecoms Investment Opportunities Richard Gitonga

  2. Myths & Facts

  3. Myth: The Telecommunications Industry is growingFact: True, but ARPUs are declining

  4. Myth: Safaricom is by far the most dominant playerFact: Yes, but only in the mass market retail segment

  5. Myth: This is a great time for ISPs to expand their reach and coverageFact: This is a great time for them to overhaul their business model

  6. Myth: Invest your money in TelcosFact: Invest your money in CSPs and VAS models

  7. Myth: BPOs are a great place to invest in the long term in line with GoK 2030 visionFact: Kenya does not have a comprehensive, competitive and executable ICT strategy; What efforts is GoK making?

  8. Snapshot of ICT • Varying Customer segments • Convergence • Regulatory: Ex-Ante to Ex-Post • Consolidation • Declining GoMs/ARPUs • Non-traditional competition • Human capital challenges

  9. Trends in the Kenya Market (2005-2010)Penetration rates & revenues evolution Revenues Revenues Revenues Penetration rate Penetration rate Penetration rate Internet revenues & penetrationLocal currency, %household Mobile revenues & penetration Local currency, %population Fixed revenues & penetrationLocal currency, %household Mobile market Key facts Internet market Key facts Fixed market Key facts • Fact 1: Increased penetration with more access solutions, e.g. ADSL, EVDO, etc. • Fact 2: Increased consumption due to reduction in per unit costs • Fact 3: Support from GoK ICT policy – “One laptop per child” • Fact 1: Numbers are growing with low ARPUS • Fact 2: Revenues based on Voice only • Fact 3: Need to add VAS so as to sustain and increase ARPUs • Fact 1:Dominated by one monopolistic player but threat of new SNO entrant. • Fact 2: Plagued by excessive incidence of vandalism and poor network quality. • Fact 3: Faces revenue declines due to competition from mobile and wireless

  10. Trends in the Kenya Market (2005-2010)& ARPU trends Fixed ARPU Data ARPU Mobile prepaid ARPU Mobile market evolution Fixed market evolution Internet market evolution • Trends 1: Demand expected for higher speeds especially by Corporates & SMEs • Trends 2: Usage expected to increase as tariffs come down in a more competitive market • Trends 3: Need to expand bandwidth to carry more volumes • Trends 1: Drastic reduction in international traffic due to cheaper rates from global competition • Trends 2: National traffic has remained constant • Trends 3: Broad Band expected to boost growth on fixed line • Trends 1: Price wars have brought down prices coupled with Regulation price caps introduced by CCK • Trends 2: Higher growth on prepaid subscriber (mass market) • Trends 3: ARPUS declining faster than for fixed

  11. From Ex-Ante to Ex-Post Regulation • Unified Licensing Framework • ICT Bill 2008 – Convergence – Postal Services, Telecommunications & Broadcasting • Universal Service Obligations • Number Portability

  12. Changing demographics and psychographics are bringing disruption to the Telecommunications industry

  13. Regulatory environment- Mobile and Fixed Termination Rates Evolution Mobile and average national fixed termination rates evolution • Ever wondered what happened to LLO business models like Flashcom and Popote Wireless?

  14. Country competitive landscape 4 2 Jamii Telcom Access network Wholesaleaccess Fixed 3 Services* 1 No or limited assets Services* Operator Mobile

  15. Age of Convergence -Technology Neutrality

  16. Strategic Options & Thoughtstarters

  17. Emerging ICT Opportunites • e- government • e-medicine • e-education • e-commerce • e-banking • Video conferencing • Wide area networks • ICT Villages • Payment Gateways

  18. Tiered Examples • GoK – National Fiber Infrastructure & GCCN (GoK Common Core Network) • Telkom Orange & SFC – MPLS & 3G Networks • Access Kenya – WiMax Wireless Infrastructure and Fibre • I&M Bank – E-Commerce Visa Payment Gateway • Cellulant – M-Commerce Payment Gateway • Cisco - Video conferencing • Kencall - BPO • Elimisha Online – Online retailing and E-Learning

  19. Opportunities to Explore • Payment gateways & Integration • Cloud Computing • Online security • Online retailing & E-Marketplaces • Content Service Provider • Digitization of existing material • Consultation in E-Business Modelling • ICT Law Specialization

  20. Thank You

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