Infrastructure upgrades and cross-network agreements benefit Kenya's already robust ICT sector

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Having earned the moniker Silicon Savannah – a status the country first actively sought in 2013 when it launched its economic development roadmap, Vision 2030 – Kenya has made significant strides in ICT. Vision 2030 included a technology development blueprint with the main objective of transforming the country into a global digital player. Progress in this regard is being fuelled by favourable government policy, investment in infrastructure and a vibrant entrepreneurial ecosystem.

Sector Contribution 

As a result of these reforms, ICT is an increasingly large contributor to the economy, directly accounting for 7% to GDP in 2016 and enabling transactions in other sectors. The near universality of mobile connectivity and rapid uptake of mobile money have made telecoms a key driver of economic activity. The mobile money ecosystem has stimulated innovation in other sectors such as financial services, agriculture and health.

Telecoms infrastructure has received substantial public and private investment in recent years, leading to improvements in the quality of connectivity, and reduced costs for consumers and businesses. Notably, between 2009 and 2016 four fibre-optic sea cables with termination points in Kenya were built, and 2017 saw several fibre-optic cables being laid across the country, predominately in urban areas. Rural access to fibre-optic or wireless internet is still limited, with rural residents largely reliant on more expensive mobile internet. The “2015/16 Kenya Integrated Household Budget Survey” report by the Kenya National Bureau of Statistics (NBS) found that 29.9% of households had internet access, with 47.1% of urban households and 16.7% of their rural counterparts connected to the internet.

The most important developments in telecoms are therefore primarily stemming from improved access to high-speed internet, increased investment in physical infrastructure, and continued entrepreneurship and innovation. The mobile segment in particular is entering a new era of enhanced cooperation among mobile operators through cross-network interoperability, which is expected to result in greater transaction volumes across the board.


Established in 1999 under the Kenya Information and Communications Act, the Communications Authority (CA) is the telecoms regulator. It licenses sector players – mobile, fixed-line and internet operators, as well as TV, radio and other broadcast media providers – and protects consumer interests in ICT. In recent years the CA has also played a key role in regulating the expanding frequency spectrum, as well as ensuring equitable access and competitiveness in the growing market.

Telecoms is also under the purview of the Competition Authority of Kenya, which has intervened in various mobile segment matters, such as reports of anti-competitive activity among operators. Meanwhile, the Central Bank of Kenya (CBK) regulates matters relating to mobile money, namely transactions across mobile money wallets and international money transfers, in much the same way that it oversees interbank activity. Mobile money users can directly send and receive money transfers from both regional and international mobile wallets and bank accounts.

Fixed-Line Players

Telkom Kenya (TK) is the sole provider of domestic, fixed-line telephony services. TK was originally established as the Kenya Post and Telecommunications Corporation (KPTC), a government-owned entity that not only offered postal, telephone and mobile services, but also was tasked with regulatory oversight of these responsibilities.

The KPTC has since undergone more than two decades of division and specialisation. In 1997 mobile services were split off to public subsidiary Safaricom, and in 1999 the KPTC was separated into three bodies: the CA regulates sector activities, while Kenya Post handles mail services and TK provides telephony.

Orange, a French telecoms company, entered the Kenyan fixed-line market in 2007 with a 51% acquisition of TK, and it subsequently increased this stake to 70% in 2012. Orange has since divested from TK, finalising the sale of this stake to UK-based private equity firm Helios Investment Partners in June 2016. However, further negotiations saw Helios receive a 60% stake, while the Kenyan government retained a 40% share of the telecoms firm.

TK discontinued the Orange brand in mid-2017 and launched its new Telkom brand. While these moves saw TK’s mobile subscriptions increase from 3.4m in June 2017 to 3.9m three months later, this mobile focus reflects the downward trend of fixed lines throughout the world: in the first quarter of 2018 Kenya had 68,299 fixed-line telephone subscriptions, a 5% year-on-year (y-o-y) decline.

Mobile Operators

The mobile market has successfully reached the vast majority of the populace, with 44.1m mobile subscriptions in the first quarter of 2018, translating to a penetration rate of 95.1%, according to the CA. This marked a significant rise from the 39.1m subscriptions and 86.2% penetration recorded in the first quarter of 2017.

These subscriptions were dominated by three operators: Safaricom was the largest by far, with 29.6m subscribers and 67% of the market, while Airtel Kenya had 8.71m (19.7%) and TK 3.8m (8.6%). Finserv Africa, a smaller operator, had 4.4% of the market, followed by Mobile Pay with 0.2% and Sema Mobile Services with less than 0.1%.

The structure of the mobile segment underwent significant structural change in the 2010s. In the early part of the decade the industry was characterised by strong competition and price wars between Safaricom, Airtel Kenya, Orange and yuMobile, which led to call rates as low as KSh2 ($0.02) per minute. However, the period since 2014 has seen considerable consolidation. India-based Essar, which established yuMobile in 2008 through its acquisition of Econet Kenya, was the first to exit the market, selling yuMobile to Airtel Kenya and Safaricom for a total of $120m, with the former taking over yuMobile’s subscribers and the latter assuming its infrastructure, including base stations and towers. Following this was the aforementioned exit of Orange in June 2016, whereby it sold its entire stake in TK to Helios Investment Partners for an undisclosed sum.

Safaricom’s predominance has eased since FY 2016/17, when it accounted for 72.6% of mobile subscriptions. However, its M-Pesa service still accounts for the vast majority of the mobile money market – in terms of both the number of wallets and the value of transactions – in 2018 (see analysis). While Safaricom was the first and only operator to offer 4G mobile internet for several years, in mid-2017 TK rolled out 4G availability, followed by Airtel in May 2018.


After the 1997 establishment of Safaricom, in 2000 Vodafone UK acquired a 40% stake and management responsibility in the firm. In May 2017 Vodafone sold 35% of this to Vodacom, its South African subsidiary, for $2.6bn as part of efforts to consolidate its sub-Saharan African assets.

In 2017 Safaricom recorded KSh213bn ($2.1bn) in revenue, with 51.7% derived from the mobile voice and SMS markets, 25.9% from M-Pesa, 16.2% from data, 2% from other services, and 4.1% from device sales and other sources. The substantial share of revenue from services apart from mobile telephony or SMS, including M-Pesa, reflects both the firm’s efforts to diversify away from telecoms and M-Pesa’s significant influence over the market. As Safaricom’s most profitable business unit in 2017, M-Pesa had revenue inflows from not only mobile money transfers between M-Pesa users, but also merchant payments and commissions charged to companies that host M-Pesa-integrated services.

The second-largest mobile operator by market share is Airtel Kenya, a wholly owned subsidiary of India-headquartered Bharti Airtel. Airtel Kenya began operations in 2010, when Bharti Airtel purchased Kuwait-based Zain’s Africa operations for $10.7bn. Zain had previously secured this footprint in a 2007 acquisition of Celtel International for $3.4bn.

TK, the third-largest mobile operator, recorded the strongest growth of any provider in 2017. The aforementioned acquisition and marketing campaign saw TK’s market share increase from 7.2% in the second quarter of 2017 to 9% in the final quarter of that year, before easing back to 8.6% in early 2018.

Lastly, Finserv Africa is a fully owned subsidiary of Equity Group, a mobile virtual network operator using Airtel facilities. In March 2018 Finserv Africa had 1.94m subscriptions, with customers able to access bank services via their mobile phones.


In 2015 the CA commissioned a report on competitiveness in the mobile market. Released in 2017 and updated in 2018, the report found that Safaricom’s dominance was largely based on its superior infrastructure. In its 2018 review of the market, UK consulting firm Analysys Mason highlighted that Airtel and TK had limited reach in certain parts of the country, as they lacked an adequate base station. The consultancy noted that infrastructure sharing by Safaricom may prove more economical than Airtel and TK building base stations of their own, particularly in the northern counties of Isiolo, Garissa, Mandera, Marsabit, Samburu, Turkana and Wajir.

Mobile Money

Safaricom’s M-Pesa service dominates the mobile market, with 23.6m mobile money subscriptions in the first quarter of 2018, representing 81.2% of the 29.1m total active users and facilitating 79.1% of the KSh1.87trn ($18.3bn) worth of transactions over this period. In July 2016 the company introduced its own payment card to facilitate transactions at brick-and-mortar retail establishments. The M-Pesa card is linked to a user’s M-Pesa mobile wallet and operates through a near-field communication system, allowing customers to use the service at enabled points of sale using so-called tap-and-go payment.

Airtel Money, which held 3.4m wallets and 11.6% of subscriptions in the first quarter of 2018; and Equitel Money, which has 1.9m wallets, representing 6.7% market share, are the two next-largest players. However, T-Kash, a new entrant, joined the market in the first quarter of 2018 with 34,149 subscriptions.

In February 2014 Airtel Money partnered with Visa and Chase Bank to launch the pre-paid Airtel Money Card, which enabled users to complete card transactions with their mobile wallet balances to shop online, withdraw cash from ATMs and transact in any location in which Visa is accepted. However, in April 2016 Chase Bank came to the brink of collapse, causing Airtel to withdraw the card from the market before reinstating it in August 2016.

Part of Airtel’s motivation to launch the card came from its plan to grow its agent network. Agents – physical retail points at which customers can deposit and withdraw cash from their wallets – are vital to the mobile money ecosystem. By the first quarter of 2018 Airtel Money had 31,240 agents, compared to M-Pesa’s 156,534. Despite T-Kash’s new entrance and relatively small market share, it already had 8343 agents by March 2018.

Data from the CBK shows that mobile money facilitated KSh3.6trn ($35.3bn) of transactions in 2017. M-Pesa has played a key role in encouraging the use and wide uptake of mobile money as an alternative to cash and conventional banking. This is held up as a Kenyan success story and a model of how technology can facilitate economic development spite of infrastructure shortfalls. The strong uptake of mobile money has spurred innovation in financial services, agriculture, health and renewable energy companies, and Kenya has become a leading destination on the continent for entrepreneurship.


The CA’s mobile industry competitiveness report also revealed that competitiveness was hampered by a lack of interoperability across mobile networks, particularly for mobile money. Before April 2018 customers could not easily perform direct transactions across operators; they faced higher fees and long delays for cross-network transactions, and in some cases activity between providers was entirely unsupported. The regulatory framework and pricing by the mobile networks drove up the cost of cross-network transfers.

The lack of coordination among providers led to market consolidation and reduced competition, as customers would default to the operator that their friends, family members and merchants used. Various industry players lobbied the CBK to change the regulations to facilitate cross-network money transfers in order to increase competition and consumer choice, as well as reduce the systemic risk resulting from one company dominating the market. These same groups urged the industry to reduce fees on cross-network transfers, arguing that this would stimulate the broader use of mobile money, which would ultimately benefit all players.

With the support of the CBK, Airtel and Safaricom began a cross-network money transfer pilot in February 2018. This was initially limited to employees of the two firms, enabling interoperability across the systems. After the success of this programme, in April 2018 this was extended to include the general public and TK. The agreement saw Safaricom and Airtel reduce their tariffs for cross-network mobile money transfers by up to 75%. The companies also raised daily cross-network transfer limits, removing previous disincentives and barriers.

Government-Led Initiatives

While operators are stepping up coordination efforts, the Ministry of Information, Communications and Technology (MoICT), a federal body established in 2013, oversees, streamlines and manages domestic ICT initiatives. Public expenditure in ICT has largely been targeted at projects outlined in the Kenya National ICT Master Plan 2014-17, which includes a core focus on implementing e-government services. The government outlined a subsequent National ICT Master Plan 2018-22, which primarily aims to create an integrated court management system, supported by e-courts, enterprise systems, and improved lines of communication and collaboration.

In December 2017 President Uhuru Kenyatta announced the Big Four agenda, an outline for his administration’s second term in office based on four pillars: affordable housing, food security, manufacturing and affordable health care. While technology was not explicitly included in the initial statement, the subsequent commentary and full articulation of the strategy expressed plans for technology to play an instrumental role in achieving these goals.

In a speech delivered at a conference in February 2018 jointly hosted by the US Chamber of Commerce – Africa Business Centre and Microsoft, President Kenyatta emphasised the importance of ICT in increasing food security, as it could facilitate access to agricultural inputs, provide more accurate weather forecasts and crop conditions, and help track counterfeit materials, which would result in increased transparency and fairer pricing mechanisms. “Digital technology also underpins a range of agro-financing services that are essential for equipping smallholder farmers across the country,” he said.

Emerging Technology

In February 2018 Joseph Mucheru, cabinet secretary of the MoICT, announced the formation of a task force to investigate the potential for emerging technologies such as blockchain, artificial intelligence and the internet of things to affect national development. The 10-person task force comprises various important players in ICT, including Bitange Ndemo, a former permanent secretary at the MoICT; Juliana Rotich, the co-founder of Ushahidi, a not-for-profit technology company; researchers from IBM; and the head of regulatory affairs at Safaricom. Their mandate is to develop a roadmap on how emerging technologies such as blockchain can be leveraged in Kenya over the coming years, with a primary focus on job creation.


The uptake of such technological advancements are being facilitated by notable efforts in recent years to increase the availability and quality of internet connections. In 2009 a new generation of undersea cables began operating off the coast of East Africa, leading to increased internet capacity throughout the region.

The first submarine cable operator to launch in Kenya was SEACOM, a privately held company with cable landing points in four African cities including Mombasa. A number of operators, such as SEACOM and The East African Marine System, upgraded their cables in 2016 and 2017.

Greater broadband connectivity has brought faster internet speeds, lower costs and greater competition. While in 2015 a 25-Mbps connection cost $4000-5000 per month, by mid-2018 this fell to around $550. Lower costs have been beneficial to small businesses, start-ups and home users alike.

According to the CA, the number of internet and data subscriptions in Kenya grew by 40.5% y-o-y in the first quarter of 2018, from 25.7m in the first quarter of 2017 to 36.1m one year later. While the vast majority (35.8m) were mobile connections, with this segment up 40.1% y-o-y, terrestrial wireless data recorded the strongest growth in percentage terms, expanding by 182% y-o-y from 36,104 to 101,742.

The CA reported that there were 327,506 non-mobile internet subscriptions in March 2018. The main providers are Wanachi Group (Kenya), trading as Zuku internet, with 34.4% of the market; Safaricom with 19.4%; Mawingu Networks with 18.2%; and Jamii Telecommunications, trading as Faiba, with 11%. The remaining 17% of the market is held by other players, including Poa Internet Kenya (Argon Telecom Services), Internet Solutions Kenya (Access Kenya Group), Liquid Telecommunications Kenya and TK.

These improvements in the cost of and access to internet have been well received by stakeholders. “Kenya has done a good job when it comes to internet penetration,” Corine Mbiaketcha Nana, managing director for Kenya at Oracle, told OBG. “Acceleration potential is high, as there have been significant advances even at the government level.”


Kenya Power installed fibre-optic cables across the country in 2017. These efforts – in addition to upgrades by other companies – have enabled significantly faster internet speeds, supporting the rapid uptake of such services. Additionally, in 2017 Kenya switched from analogue to digital television, freeing up 700 MHz of spectrum, which can now be used to deliver 4G services. The CA decided to split the spectrum into three blocks to increase the number of potential beneficiaries of the allocation. It awarded a segment to Jamii Telecommunications in 2017, and in December 2017 two consortia submitted applications for the remaining two blocks, though they were still being evaluated in September 2018.

Cloud Computing

Increased internet access is fuelling demand for cloud computing services from not only local businesses, but also international tech companies. In 2017 Oracle and Microsoft launched cloud-based products for the Kenyan market, and South African telecoms firm MTN opened a KSh1.33bn ($13m) data centre in Nairobi in partnership with Microsoft; MTN joins Liquid Telecom Africa and a consortium of local investors trading as icolo. io in operating data centres in Kenya.


Higher internet penetration has also increased the potential scope of cybersecurity threats, putting the country in the cross hairs of international hackers. For example, in January 2018 National Bank of Kenya was the victim of an attack that resulted in the loss of up to KSh29m ($284,000).

The growing threat of cyberattacks is a worldwide phenomenon, with the World Economic Forum reporting that global corporate leaders’ greatest concern for 2018 was cybersecurity. Companies in Kenya are especially vulnerable due to relatively weak cybersecurity protocols. According to the NBS, only 35% of companies had any kind of IT security policy in 2017, though the market for these products is growing. “We are seeing increasing demand for cybersecurity products from businesses of all sizes in Kenya,” Abdul Mohamedbhai, the technical director at cloud solutions provider XC360 Kenya, told OBG. “This is driven by greater migration to the cloud, facilitated by the increased broadband spectrum.”

Digital Jobs

While cloud computing and cybersecurity are on the rise, the business process outsourcing (BPO) industry is nascent, with few specialised players. The major users of call centre services – such as mobile operators, banks and utilities – operate in-house centres with minimal outsourcing.

However, developing this segment offers significant potential in addressing the relatively high youth unemployment rate. In 2017, 26.2% of individuals between 15 and 22 years of age were unemployed, nearly double the world average of 13.6%, according to the World Bank. Call centres and BPO facilities could provide semi-skilled digital jobs for young people, helping to bridge this gap. Digital Data Divide Kenya – a social enterprise providing work and training for recent high school graduates from low-income neighbourhoods in Nairobi – is taking advantage of this potential, employing young individuals to provide BPO services to international companies. Other companies focused on developing local talent and creating digital jobs include the Moringa School, a coding academy founded in Nairobi in 2014 that provides high school graduates with intensive and accelerated training in software development.

Foreign firms are also interested. After its founding in 2014, US tech firm Andela entered the Kenyan market in 2017. Andela trains university graduates from any discipline to become software developers and helps them find employment in local businesses. After receiving $24bn in Series B and $40bn in Series C funding in June 2016 and October 2017, respectively, Andela began operations in Nigeria, before expanding into Kenya, Uganda and elsewhere.


The growth in technology capacity and uptake is a result of considerable public and private investment in the physical infrastructure that forms the backbone of ICT. Improvements, such as the addition of four fibre-optic sea cables between 2009 and 2016, have stepped up the quality of connectivity and reduced costs for consumers and businesses. Value-added services supported by mobile money have enabled mobile operators to maintain profitability, as the industry’s focus has shifted, first from voice to SMS, then to the current era of data-driven growth. “With high internet penetration rate, in addition to an abundant supply of highly trained IT resources, the number of start-ups in the country are increasing. This is perhaps an indication of investor confidence in Kenya and a recognition of Kenya’s status as a technology hub in Africa,” Ebrima Fatty, CEO of e-commerce platform AfricaSokoni, told OBG.

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The Report: Kenya 2018

ICT chapter from The Report: Kenya 2018

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