Major shifts are taking place in the Internet business as players position themselves to reap from the undersea fibre optic cables.
High interest in buying opportunities has driven industry top dogs like Safaricom, Zain, Access Kenya, and Wananchi Group to prey on small Internet Service Provider businesses in search of value buys.
Infrastructure suppliers like Kenya Data Networks, UUNET and Swift Global are also making strategic moves to have a grip on the market segment.
So intense is the scramble for the small ISPs, which deal directly with end users, that they are projected to be swallowed up by the bigger players looking to broaden their revenue streams beyond corporate internet services and secure more infrastructure.
The lower end of the market, where small ISPs have managed to survive on smaller profit margins amidst stiff competition are particularly vulnerable.
They will be forced to operate within tighter profit margins and in order to survive, seek business friendly terms from large players who will own much of the bandwidth through equity ownership in the cable projects.
The undersea cables will link Kenya to the rest of the world at cheaper rates compared to the current satellite connectivity. Two of them - SEACOM and TEAMs - are expected in June while EASSy - the third one - is scheduled for completion next year.
The cables will be a watershed since the sector was fully deregulated six years ago with the end of Telkom Kenya’s monopoly, through Jambonet on international connectivity.
“The metro fibre will give us the edge to provide better connectivity for our clients even as it secures us much needed infrastructure in coming years,” said Jonathan Somen, AccessKenya Managing Director.
The company has spent Sh700 million on its metro fibre project. Internet business and access in the country has for a number of years remained a corporate affair with 80 per cent of the three million users being in Nairobi.
The entry of the cables is expected to increase the number of Internet users to over 10 million in the next five years. The bigger cake anticipated from the faster and cheaper medium has attracted more players into the field in the last year, many seeking a front row seat in the inner circle.
For some like Kenya Data Networks, this has meant capitalizing on a metro fibre optic project that the firm hopes to leverage once international fibre arrives to provide connectivity to rural Kenya and neighbouring countries.
To hook more users into its 3,500 kilometre pipes (the terrestrial fibre optic cables) it has been laying across the country, the company offers free Internet services and on net calls to subscribers using its Internet access based service dubbed the Butterfly.
Telkom Kenya is offering its Orange Internet wireless access service at one shilling per minute after a subscriber invests Sh3, 500 on a plug in and play modem.
AccessKenya on the other hand charges a Set up fee (one time) of Sh12, 500 and a monthly access fee of between Sh4, 000 and 5,000 depending on speed.
UUNET Kenya on the other intends to use the opportunity brought about by the cables to start offering television services via the Internet.
The company has invested in Seacom and last year announced a Sh680 million network upgrade to help it take full advantage of the Seacom cable.
The UUNET (K) Managing Director, Mr. Tom Omariba, said time for Internet Protocol Television (IPTV) and Digital signal Distribution is ripe as the sub-Marine fibre cables will guarantee high bandwidth capacity and better quality.
Swift Global is banking on a franchising effort in its bid to cut operational costs by 20 per cent in order to maximise profits.
Nick Odero, the company’s General Manager, said he projected the concept would increase the company’s countrywide footprint by 40 per cent.
Africa Online already competes in the corporate and home markets and has been since its acquisition by Telkom South Africa been focused on expanding its network.
“We are focused on offering a reliable last mile network that will enable the delivery of the Fibre Optic Capacity to the user at their homes and offices,” said Ken Munyi Africa Online CEO.
The fibre cables are expected to spur a number of social and commercial activities in the country mainly due to the expected drop of the current cost of connecting to the Internet to a tenth of current costs.
One megabyte now costs Sh519, 168 ($ 6,500) per month but with the submarine fibre optic connectivity this is expected to fall to Sh33, 000 ($ 500) per megabyte per month.
Other than the reduced costs to the operators, the undersea cables will link villages or remote towns to other cities in the world via fibre arteries such as the National Optic Fibre Backbone (NOFB) and the metro fibre projects that have already been put in place by players like Kenya Data Networks and Telkom Kenya.
(Source: Business Daily)