Wednesday, September 2, 2015

Equitel Increases Transfer Fees to M-Pesa by more than 100%!!!

So I recently came across this InfoTaKe.
Users transferring money from Equity Bank’s Equitel Mobile Money platform have been hit by a more than 100% increase in the cost of transferring money from the platform to Safaricom’s M-Pesa. 
The new charges appear to have been implemented at the start of August, just as Equitel officially announced it’s transition from a pilot phase. No official communication on the new charges was relayed to Equitel users.

This doesn't surprise me, but the timing is rather unfortunate given that Safaricom has been battling not to be declared the dominant player in the mobile industry.

It has been suggested that this may be the beginning of the end for Equitel, but given what I've heard of Equity Bank's CEO, James Mwangi, the war is just beginning.

Probably to make it seem less discriminatory they've since announced this will affect all banks. Peace.

Friday, August 28, 2015

Could Airtel Kenya be Up for Sale?

Some interesting news lately from the Business Daily:
Airtel Kenya is operating under the licence previously held by Essar, which it bought out last year, as its permit which expired in February is yet to be renewed.
The Communications Authority of Kenya (CA) yesterday said it was still considering “a number of issues” before renewing Airtel’s licence.
Why would Airtel not renew their license? I wonder what the CA means by issues? Perhaps they're considering the imminent sale of Airtel Kenya to Tigo as posited by NairobiTech:
...Airtel Group is selling four more African units to operator Tigo. These include Uganda, Niger and Gabon as Bharti Airtel looks to cut its losses on the African continent. 
Speculation is now rife that Tigo could also end up taking over the Kenyan unit with pundits predicting a total Airtel exit by February next year.  
The current MD of Airtel Kenya, Adel Youseffi, was previously heading the Tigo Ghana operation.
I'd like to point out that I can't find any official sources to corroborate NairobiTech's post but s/he has proven to be rather reliable in the past. Also my own sources seem to point to the same thing but took pains to point out that it's still possible the deal may fall through. We'll see. Peace!!

Sunday, August 9, 2015

Is Data Safaricom's Future?

Once again, I'm back writing something about Safaricom. While most of the country, and the world, concentrates on M-PESA, I'd like to focus on something else, data.

From the figures below, we not only see that data revenues have not only exploded, but according to my back of the envelope calculations, they are set to approach those of M-PESA by the year 2020, and combined, will dwarf voice revenue by almost 100%; that's less than 5 years from now

For FY11 to FY15
This is incredible, and something I think we and the industry needs to pay attention to. And it seems I'm not the only one who noticed this! In announcing their full year results this year, Bob Collymore heavily highlighted that this would be an area of focus for them going forward:
Mobile data is one of the key drivers of future growth. Today we are announcing the launch of Safaricom’s home broadband solution, which is a set-top box that brings the 3G and 4G network into the home, and distributes the superfast connectivity via Wi-Fi to any existing Wi-Fi enabled devices.(FY 2014 press commentary)
Data is probably going to be the biggest money earner for Safaricom soon, but it's not a given that it'll stay that way forever. As I highlighted in my 'Zuku vs. theBIGBox' post: there's a real threat from wired unlimited connections. More than that, there's also a real chance that Safaricom falls into the same trap that has befallen a lot of their counterparts in the West: they become a pipe for internet companies (local I hope) that are far more profitable than them

I want to talk a little about the potential strategies going forward that they could use to avoid this, while growing their data revenues and potentially getting into even more profitable businesses. 

Revenue streams as percentages(note the decline of voice revenue)

Kenyans have proven that they are willing to spend money to get online. We have a couple of million of us on Facebook and just shy of 1 million on twitter (source). Other social networks like Instagram and Snapchat continue to grow in popularity locally. But this will not be enough to ensure the continued growth of data use, and therefore revenue. Most of the data that is generated on the most popular networks, Facebook and Twitter, is text and pictures. There's need for something more; that more is video.


Currently, looking at their most recent subscriber and revenue numbers, I'd estimate that each subscriber on average used approximately about KES 1350, last financial year. Yup, that's considering the fact that data revenue grew by an impressive 59% year on year. (Side note: I spend about that much per month).
  
When you look at the consumption patterns in more developed markets, most of the traffic is video. In fact, it can be said that two companies dominate in that regard: YouTube and Netflix. During peak hours, they account for about 50% of traffic on the network (predicted to go up to 80% in 4 years). I'd bet my entire salary next month that Safaricom is not seeing those types of numbers yet. But they will, eventually and I think they should be doing everything in their power to help get them there.

Youtube will definitely help them get there but it suffers from a couple of problems: one is a general problem with the platform; the other is local. 


Youtube as a platform has a real discoverability problem, it's extremely difficult to casually stumble upon good content, hell it's difficult even if you're actively looking for it. It's something that companies continue to struggle with despite their best efforts. The local problem is obvious if you take sometime to think about it; there's just not enough local content on it. The most active local channels are stations like KTN and Citizen but there are no videos that are truly viral and local. We currently don't have enough people using the platform to tell their stories or upload their video, we have a few people who are trying and I try to follow as many as I find but it's proven difficult, and it's not consistent.

The first of course is up to YouTube to solve, the second; well it'll solve itself as more Kenyans get online and realise the potential of the platform. But there's a little Safaricom can do to encourage it, including: highlighting, training and sponsoring some of the content online, and perhaps running campaigns to encourage people to upload their stuff.

But this only gets them half the way there. Next, and I hesitate to write this because I've been thinking of launching something around this myself, Safaricom could launch the their own Netflix competitor. Work on getting a local content both from independent studios and film makers, and from the TV stations; stations are a great source because they have a large back catalogue and their titles are instantly recognisable by most of the population.

The great thing about a Netflix type of service is that it could work as another revenue stream (Netflix is a 50 billion dollar company), they can harp about how they're creating value in the local entertainment industry and it'll be able to work across all networks (and worldwide). All this while giving people a reason to use more data. I've written about this before when I analysed the threat that theBIGbox represents for the big 3 TV stations, which I hear has been recalled because it was having technical issues.


Great thing is that all this is pretty much inevitable, it's estimated that mobile data use will grow tenfold around the world and in Africa by 2018. The real question is whether Safaricom will benefit from it in other ways than just providing the pipe. My bet is yes. Peace!!!

PS:I've been researching and writing this post every since my last post about Safaricom. Since then it's been reported that Safaricom applied for a broadcasting licence for both a FTA channel and an IP channel. I think they're going the route I highlighted above. Also seems some financial analysts agree with me that data is Safaricom's future.

Friday, July 10, 2015

Zuku vs. theBIGbox

Recently, there's been a lot of talk about Safaricom's 4G efforts. Well, not exactly their 4G efforts, but their set top box, 'creatively' called theBIGbox (in case it wasn't clear, that's sarcasm). In this post, I want to compare their offering to one of their competitors that always comes up every time anyone talks about Internet in Kenya, Zuku.

More often than not, when the two are compared, the better offering seems to be Zuku. But what everyone forgets in these comparisons is that Safaricom doesn't have to compete with Zuku; at least not yet.

Zuku, through the Wananchi Group, has pursued a strategy of building out their fibre network over time, slowly but surely expanding their network all over Nairobi and into parts of Mombasa. You can see the areas that they cover in the image below taken from their website:

Zuku coverage, Nairobi

Given the wide area they cover in Nairobi, I understand why everyone compares the two services. Further adding to this comparison is the fact that Safaricom has deployed 4G in only two cities: Nairobi and Mombasa (see maps below); the same regions as Zuku’s current coverage.
4G coverage, Nairobi(http://opensignal.com/)

To be clear, when I say they don't have to compete, I don't mean that they're not trying to address the same markets. Zuku and Safaricom's theBIGbox are both trying to capture what I believe is the most valuable data market for Safaricom going forward: the home.
3G and 4G coverage country wide(http://opensignal.com/)

Whenever Safaricom's home efforts are mentioned, in the context of theBIGbox at least, there's a tendency to mention that Safaricom needs to offer an unlimited data option. However, for the foreseeable future, there's no need for that.

Safaricom only needs to be the fastest and most reliable option in the areas outside Nairobi and Mombasa, i.e. in the rest of the markets they'll be expanding to. I didn't mention the price in that statement, not because it's not important (it is), but because it's more complicated than just being the cheapest.

theBIGbox doesn't need to have an unlimited option in the beginning because there's no one competing with them in the home market outside Nairobi and Mombasa that's offering the same home service, and the speeds that come with 4G will not be matched by other MNOs for sometime given, that none of the mobile operators have been issued licenses, and because they lack capital and, frankly, the strategic thinking and planning to compete with Safaricom.

Safaricom will be expanding 4G to 13 more cities in this financial year, which means in 13 cities there's not going to be any Zuku, or Zuku like service, to compare and compete with. In those cities, they don't have to go unlimited and can continue to apply data caps (limits) to the internet connection to ensure they get the maximum profit while the competition is low.

“Our 4G network is now available in Nairobi and Mombasa, and we will roll out to another 13 towns and cities by year end. This is a first for Kenya and will enable our customers to experience superfast home broadband and mobile data offerings.” Bobby Collymore(FY 2014 press commentary)

This doesn't mean Safaricom gets a free pass, I think they still need to put some thought into how it's marketed and how it's priced.

Initial signals on marketing seem to be right, though there's something to be said about pushing the value proposition of theBIGbox, but the pricing has been, in my opinion, so far completely bungled.

First, the pricing for theBIGbox has been all wrong. I don't understand why they introduced it at KES 10,000. Safaricom is a billion dollar company with profits in the $100s of millions, they can afford to subsidise the cost of getting this device into every home with a TV. Further, they introduced it when every pay TV provider had begun to heavily discount their set top boxes and the free to air (FTA) decoders all maxed out at KES 4,000. Selling something like theBIGbox for KES 10,000 when the value is not clear and hardly worth it in the market it’s targeting was a mistake.

Second, the benefits and advantages of an internet connected device like theBIGbox where not developed before launch. I've talked about these capabilities from a media perspective in a previous post, but just launching with free YouTube for a couple of months was not enough.
Finally, and most importantly, they haven't done enough to highlight the cheaper bundle options on theBIGbox, and perhaps the discounts compared to the normal data bundles don't go far enough, though 4k for 50GB is quite a discount on the Safaricom network. In fact, I only found out about the cheaper bundles for theBIGbox when doing research for this post.

Safaricom doesn't have to compete with Zuku because the potential addressable market outside the areas Zuku operates is still potentially lucrative for the foreseeable future. In fact, they don't have to have to cover that much of the land mass to cover most of the population for 3G coverage. The performance highlights from their 2014 sustainability report show that covering 25% of land mass is equivalent to covering 58% of the population(see image).
 Safaricom’s 2014 sustainability report page 10

“We have increased the population coverage of our 3G network to 69%, completed the modernization of our 2G network which covers 92% of the population and have connected 30% of our base stations to our fibre.” Bob Collymore(FY 2014 press commentary)

This doesn't mean that Safaricom can rest on its laurels. Zuku has proven that it knows how to deploy great fixed internet services and it has an advantage over Safaricom, and its other revivals: an exclusive partnership with Kenya Power to use their infrastructure, the poles mostly, to deploy their fibre. This makes it cheaper and faster for them to do so. In an in interview with CNBC Africa (worth watching for more than just context to this post), Wananchi group's vice chairman, Richard Bell, naturally dismissive of 4G and Safaricom's effort, did mention two particular cities: Nakuru and Kisumu. So they could be following Safaricom into the 13 cities sooner than we think. Peace!!!

Wednesday, May 6, 2015

The Box is Coming

 Safaricom is launching their digital set-top box this Friday, 8th May, dubbed 'The Box'. When they first announced it I was ultra excited for what it might mean for the current media landscape in Kenya. But before I get into that let's see what features 'The Box' will have: powered by Android, in addition to being a television set top box, it'll offer video on demand to also provide internet access to users through a 4G SIM and wireless hotspot capabilities and other services like gaming.

There's much to unpack just from those few details, but what I wanted to focus on was two things that could be potentially related to each other: The Box will have an internet connection and will offer video on demand.

The current media landscape in Kenya is dominated by what some people call the Big 3: Citizen, NTV and KTN. These 3 command the lions share of the viewership something like 70%, new numbers are yet to be released since we went all digital. Nonetheless, I suspect that we're yet to see any changes to these numbers.

One problem that the incumbents suffer from is that they all offer similar programs in a similar fashion. *What comes next is a broad generalisation to make a point* Morning shows from 6 until about 9. Nigerian movie/soaps until 1. News between 1 and 2. Back to soaps until 4. News for 15 min. Children's programming till 5. 5 to 6 music time. Soaps again. 7 news in Kiswahili . Local programming of some sort. 9 news in English. Soaps/more local programming. 11 onwards CNN/Al-Jezeera/BBC until 6. Rinse repeat.

While each station has shows that set them apart from the others there really hasn't been any of them that has been able to set themselves drastically apart from the others programming-wise. (To be fair Citizen did, then the others, foolishly I should say, copied them)

This lack of differentiation is yet to hurt them financially as they still command the largest audiences meaning that advertisers who want to reach the largest audiences have to go through them. The real problem with this model is the lack of targeting.

In the analogue age, broadcasters commissioned content for a broad mass of people who watched just a few shows on just five channels. In lieu of further media choice, broadcasters had to focus their efforts just on the single dimension: primetime slots. And, while the 7:30pm slot is great, from an advertising perspective it means that much spend is wasted. The vast majority of buyers would prefer to reach tightly-defined, target consumer groups. By telling advertisers what viewers are watching, the AdSmart set-top box technology lets both national and local advertisers serve much more relevant advertising to particular categories of viewers.
In that paragraph you could replace "AdSmart" for "The Box". Digital migration has given us so much more choice when it comes to viewing, but what The Box has the potential to bring is very targeted advertising and justification of advertising spend.

Given Safaricom's broad network reach, they'll be able to collect highly specific data on what everyone is viewing. Far more specific than the generalisation given from statistically relevant, but small, samples we usually get. Combine this with the data that Safaricom already has on each user of its network and you're looking at a treasure trove of data for advertising.

Want to advertise specifically to 20 year olds or young children (4 to 10), when they give their full attention to the TV? It's not hard to build a profile of this kind of households: before 9 the TV is mostly set to children's channels. So you want to put advertising on those channels or on the channels and programmes they watch when the kids have gone to bed.

Finally given the connected nature perhaps they'll be able to overlay their own ads in programming for the free to air channels. This will probably get annoying quick unless done in a clever way but if you get something in return for it, such as access to certain channels or services for free I can see how people would bare with them.

All this data, who is viewing what and at what times will be available to Safaricom - and their various partners, I assume - in real time and this will help them out in the second, potentially bigger threat, to the big 3 and every other channel in the country really. Video on demand.

Given what they'll know about your viewing habits from watching other stations, this information could be used to make highly targeted suggestions on the VOD services. At least in the beginning, as they make the value proposition to customers. It'll be almost trivial to do so and not to mention potentially lucrative.

Something that I'll be looking forward to hearing during the launch of this VOD service is who they'll be partnering with for the initial launch. I don't imagine they'll be giving this to platforms that already exist, such as Netflix or Iroko TV, I suspect that they'll be launching their own distribution network, perhaps Saf TV, that will carry content from their partners.

I'd be surprised if BuniTV with their multitude of documentaries, movies and shows particularly the hit series XYZ show, isn't among the launch partners.

This VOD platform will also be a potential game changer for local production of video. Finally there'll be a viable option to distributing and monetising, via Mpesa, content that is produced in the country. I've argued for the longest time that piracy is not the real problem that creatives in this country face, it is but a symptom of a much bigger problem: poor and lacking distribution systems.

So what are the big 3 to do? Well first I'd be looking to partner with Safaricom on the video on demand platform. They all have local series produced for them that they no longer show, and back episodes of the ones they do. I'd put all of that on the service to make revenue but also to collect data on what viewers like. Finally they need to work at differentiating themselves further from each other, instead of targeting everyone, target one specific,  but large, group. This is easier said than done though.

Let's see what Safaricom announces on Friday. Meanwhile if you have any other thoughts or comments use the box below to leave them here. Peace!!!

Monday, May 4, 2015

What You Didn't Know about the National Music Policy

A lot of musicians in the the country have been complaining about their inability to make money from their art. The reason they give for this, well the one that comes out loudest, is piracy.

I have a different view from that but this is not the time for it.

Recently stakeholders from the music industry came up with a policy document that they hope may become law or inform it in some way or form.

I took the time to go through it because I was worried about what the implications may be for technology.

I like what I've read, particularly on getting schools and institutions to take music more seriously than they currently do, where people consider music a "soft" subject. Getting people to appreciate the beauty of local music is something I can get behind. 

This doesn't mean however that I don't have concerns. All of which are in Chapter 2 section 11, Copyright and Related Rights, Policy Statements

To start with, there's this worrying phrase :
The government will work with ISPs to ensure that illegitimate sites are less readily available than legitimate sites?
The vagueness of this phrase is extremely worrying but even more than that I worry about how a law with phrasing like this may be used to suppress free speech. Further, who decides what is legitimate and what isn't? Around the world we've seen that the creative industry prefers to over reach than carefully consider each case.

Second there's this
The Government shall take measures to put structures in place for effective investigation, regulation and prosecution of offenders involved in piracy and other copyright infringement
There's nothing inherently wrong with this part per se, I'm just slightly concerned about how it'll be implemented and the punishment of small scale infringers. I've read of cases around the world of overzealous prosecution perhaps best illustrated with the case of Arron Swartz, who killed himself after the US government came after him for hacking after downloading thousands of publicly available documents using MIT's network.
Finally there's this:
Government will ensure laws on internet use are in line with emerging technological trends as regards to copyright and intellectual property
What are these trends? Would they care to spell them out clearly? It's not that I don't have strong suspicions on what they mean but I don't what to make my assumptions public until I know more.

As I said before I like the rest of the policy a lot but these two phrases give me pause from wholly endorsing it. What do you think? Let me know in the comments. Peace!!!