Bloomberg News

Telkom Kenya to Start 3G Services in Third Quarter, CEO Says

June 20, 2011

June 20 (Bloomberg) -- Telkom Kenya Ltd., a unit of France Telecom SA, plans to start offering third-generation or 3G telecommunications services in the third quarter of this year, Chief Executive Officer Mickael Ghossein said.

“We want to have very good network and very good customer service because if you fail you kill your business,” Ghossein said in a June 17 interview in Nairobi. The company, which is 49 percent state-owned, is upgrading networks to make them capable of handling fourth-generation technology too, so “in the future, if we have to launch 4G, we don’t have to buy another equipment,” he said.

Mobile operators in Kenya, where Telkom competes with units of Vodafone Group Plc and Delhi-based Bharti Airtel Ltd., are becoming more reliant on data for revenue after the industry regulator in August halved the rates that operators charge each other to connect voice calls, prompting competing price cuts. Since then, Telkom Kenya has lost as much as 2 billion shillings ($22 million) in revenue from voice services, Ghossein said.

Kenyan President Mwai Kibaki ordered a halt to further cuts in call tariffs after opposition from the companies, Business Daily reported June 8. Charges had been expected to drop to 1.44 shillings per call at the beginning of July from 2.21 shillings, it said.

Telkom Kenya won a 3G license in November, enabling it to offer faster data transmission that allows users to download music and video to their handsets. Data speeds will rise as high as 21 megabytes per second, from as low as 64 kilobytes per second now, Ghossein said.

Data Target

The company aims to make 40 percent of revenue from data by the end of this year, up from 15 percent, Ghossein said in February. Its competitors are Vodafone’s Safaricom Ltd., Bharti’s Airtel Kenya Ltd. and Essar Telecom Kenya Ltd., a unit of Essar Group.

Nairobi-based Telkom Kenya, which has 2,100 direct employees, last week began talks with the workers union as part of “reorganization of the company to be more lean and to serve customers better,” Ghossein said.

“Today the problem is that some activities in the company more or less don’t exist or have decreased,” he said. “We need more IP engineers, more solution engineers, more sales people.”

The company’s biggest costs are fees for frequencies and licenses, which take up to 30 percent of revenue, Ghossein said. The next-biggest is vandalism of fiber-optic links, which costs as much as 100 million shillings per incident, he said. Repairs typically take 1 1/2 days, during which users in the affected areas can’t make calls, Ghossein said.

In the three months through December, Telkom Kenya added 973,000 new customers and its share in a market of 25 million users jumped to 15 percent from 4 percent in the previous quarter, the Communications Commission of Kenya said June 8. Safaricom, the only company with a functioning 3G network in Kenya, was the leader with 63 percent.

The number of internet users grew to about 10.2 million from 8.7 million in the previous quarter, the commission said.

--Editors: Ben Holland, Heather Langan.

To contact the reporter on this story: Eric Ombok in Nairobi at eombok@bloomberg.net.

To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net


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