Finserve Africa Ltd (backed by Equity Bank) is among the 3 companies awarded licenses to operate as MVNO’s. At KShs 100,000 a pop, these licenses drive down the costs and time it takes to setup as a telecommunications provider. The new carriers will make use of excess capacity on existing networks to deliver their services to the market. A range of services are expected to be offered by these carriers once they begin the process of customer acquisition. E-commerce will be the major area where these firms are expected to concentrate as per industry analysts. And since both the 3 MVNO’s have been in business for a while in the country, the recent developments go to give them greater access to the market than they had before.
Having played a big role in financial inclusion in the country, Equity Bank has made definitive moves both in banking and mobile money. The bank rolled out an ambitious plan to reach the unbanked through its agent system, creating a customer base of 10 million. In anticipation of the move to cashless payments by the PSV industry, Equity has partnered with several matatu Sacco’s who will utilize the solution. Zioncell Ltd and Tangazo are the other 2 carriers entering the market, both have been serving special market segments with their mobile payments solutions. This is the one differentiator that all MVNOs are counting on – the niche market.
This will make a real difference. Our SIM card is connected to all banks and customers can thus do all transactions including payments. We already have an ATM card and we’ll roll out point of sale systems and we are going NFC to enable one to just tap and pay. […] Our focus will not necessarily put us in direct collision with others – all we need is just enough of market share to keep us going and growing.
– Gichane Muraguri, a director at Mobile Pay Ltd as quoted on allAfrica.
Tangaza was licensed by the CBK back in 2010 as a mobile money platform under its parent company Mobile Pay. Services offered by Tangaza allow customers to transfer money across all the carriers in the Kenyan market. Oscar Ikinu, Tangazo MD, setup the mobile transaction service to offer customers a faster way to access money without the barriers imposed by being on different mobile networks. Zioncell on the hand was set up by MoDe (Mobile Decisioning) as a solution that originally targetted Christian institutions. MoDe has previously been recognized by the IBM with a global Entrepreneur of the Year Award after they pitched the business model of emergency airtime to a global audience. The firm has a long-standing partnership with Airtel over whose network they run the emergency airtime and Zioncell solutions.
Tangaza holds the second spot after MPesa in handling the country’s mobile money transactions. Some of the business pains exprienced in delivering its solutions including protectionist policies by mobile carriers. As for MoDe, the firm reports 200 million transactions across 5 countries in 2013. Through Zioncell, MoDe feels they can provide unique solutions (such as the idea of nano-credit) to the youth, farmers and religious institutions. “The smaller companies have the latitude to address these groups more intimately. This is where we come in,” says Julian Kyuna.
Airtel Kenya will be leasing their mobile network for use to all 3 MVNOs. The carrier had earlier presented a joint proposal together with Safaricom to acquire yuMobile’s assets and subscribers. A conditional approval from the CAK (Communications Authority of Kenya) came too late when Safaricom had already made its mind to pull out of the deal. Even so, Safcom disagreed with the CAK on the conditions to be met before the deal could be closed. On the other hand, Airtel withdrew for consultations and although they will not be mucking around with yuMobile’s business any time soon, they have openned up their networks to the new entrants in the telecom market.
The CAK’s conditions to Safcom and Airtel Kenya had required that they both open up their networks to new players in the mobile telecommunications market. Acting on the fact that the dominance of Safaricom in the Kenyan market had resulted in a battle of attrition for the rest of the operators, the regulator saw it necessary to strongly intervene in order to reduce Safcom’s market power. Since the digesting of yuMobile is yet to happen, this was never effected. However, CAK is preparing draft regulations with the explicit requirment that existing providers open up their network infrastructure to new carriers in the market. The goal is to uphold competition in the market by creating an environment where operators can charge each other for providing infrastructure or agent network. This will also have direct benefits for the customers as mobile roaming allows them to use the most efficient network available.
More than a few industry stakeholders have observed that CAK is engaging in over-regulation of the market. And Orange Kenya nods in agreement. According to Mikael Ghossein the firm’s CEO, licensing MVNOs plays down the huge investments made on infrastructure by the existing carriers. This says the Orange CEO gives MVNOs undue advantage. On a blogpost at Kachwanya, these sentiments are expressly articulated on the commentards ball:
CCK is being stupid here and acting like Kenya is some communist state or something. Since when did it become a responsibility of a state agency to dictate if private entities should or should not enter into partnerships?
I mean, Orange Kenya leases it’s infrastructure to other operators, especially the fiber but this has always been between Orange Kenya and those operators. The terms have never been dictated by CCK. Why is this different?
If Equity and Tangaza want to enter the game, they should get their own infrastructure or seek partnership with operators who do, without using CCK to blackmail existing operators with stupid threats like “we’ll not renew your license if you don’t share infrastructure”
If anything, should it not be a government responsibility to set up infrastructure for operators to plug into?
But I think even with forced partnerships, existing operators still have the arsenal to mess up those virtual operators. Lol
All MVNOs will be subjected to the regulator’s quality of service guidelines and according to the CAK boss, safeguards are in place to ensure that QoS targets are met. It is expected that a price war or two could soon ensue on the Kenyan market as incumbents mark their turf and the new entrants engage the market. As for Airtel, the provider now has a new source of revenue and maybe a chance to regain the birthright (there’s Kencell’s glory for you) it lost several incarnations ago.