Safaricom Apologizes Over Network Interruption

Kenyan operator Safaricom has apologised to its customers for a hitch that has affected its subscribers' ability to make calls or send SMSes since 01 September. 


The fault has meant that some subscribers' calls are going through only after several attempts, while SMSes are not reaching the intended recipients immediately but remaining pending for some time.


The incidence of these has been random and intermittent across the network. CEO Bob Collymore apologised for the inconvenience this has caused to customers and assured them that the situation is being closely monitored and prioritised to ensure services resume as soon as possible. 

New 4G Rules Favour Safaricom Over Other Networks

The government has changed the telecommunication licensing rules in a way that promises to lower the cost of acquiring high-speed delivery platforms and give one operator control of the market.

The new rules that among other things requires those bidding for the 4G spectrum licence is hinged on the Public Private Partnerships (PPP) model and are aimed at avoiding the battle over the pricing that dogged the issuance of the 3G licences.

Tender rules that were published on Tuesday indicate that unlike in the past when the licence was awarded to each operator, the 4G will be controlled by a consortium of players who must have at least 20 per cent local ownership.

The requirement locks out Airtel and Essar's Yu, leaving Safaricom and Telkom Kenya in the race for the tender.

The two are the only holders of the Network Facilities Provider Tier 1 category (the technical reference to mobile phone operators' licence) and with a 20 per cent local shareholding.

The government, through Treasury, has 49 per cent stake in Telkom Kenya while Safaricom is owned 40 per cent by the UK's Vodafone, 35 per cent by the Government of Kenya and 25 per cent by the public through the Nairobi Stock Exchange.

Airtel Kenya has a five per cent local ownership, after businessman Naushad Merali - the sole local partner -- sold 15 per cent of his stake in the firm last year.

Essar's Yu is 100 per cent owned by India's Essar Communications, which bought the 20 per cent stake that local firms Capital Africa, CrossLink and Startnet held last year for an undisclosed sum.

Rene Meza, the Airtel managing director, questioned the transparency of the tendering process and promised that his firm will be seeking clarification, especially on the 20 per cent rule as Airtel intends to fully participate in the tendering process.

"We will seek clarification on the requirement of 20 per cent ownership. We believe it is sufficient that an operator is licensed," said Mr Meza. "Because there is no structure for the tender proposal, evaluation of the bids by the Ministry of Information may be subjective to the extent that undermines transparency and fairness."

4G refers to the fourth generation of wireless telecommunication technology with a larger capacity to deliver data and facilitate high end of market services such as video conferencing and gaming.

Kenya's telecom operators see ownership of the technology as critical to future revenue growth with the continued decline in earnings from the voice business.

Prospective bidders are also questioning the requirement that the government becomes part of the consortia that will be competing for the 4G licence while at the same time participate in evaluation of the tenders. [Read: State to withhold licence for 4G frequency rollout]

On Thursday, the government said it will not bend the 20 per cent local ownership rule, arguing that Yu and Airtel chose to sidestep the local shareholding requirement.

"The two don't meet the 20 per cent rule and do not have national infrastructure that can be upgraded to 4G," said Bitange Ndemo, the Information permanent secretary.

Dr Ndemo said the 20 per cent rule is a policy requirement that Airtel and Yu should make an effort to comply with.

People familiar with the policy position on the matter said the ultimate goal of the tendering is to open a window for the government to ride on operators with national coverage to reduce the cost and time of deploying the 4G network in readiness for use in e-voting in 2012.

"An individual firm will have to spend not less than $4 billion to roll out the infrastructure but the model we have proposed will cost an average of $100 million and take less time," said our source.

Telecoms sector ownership rules require foreign companies to have a 20 per cent local shareholding.

It, however, gives foreign investors three year grace period to look for suitable partners.

Econet Wirelesss International, which held the third mobile license was the first beneficiary of this rule that helped it survive a protracted court battle with its local partners, the Kenya National Federation of Farmers.

Econet ultimately sold its shares to Essar Communication, a subsidiary of India's Essar Global four years ago.

He acquired and immediately sold the Vivendi stake in 2004 at $250 million remaining with his 40 per cent.

Kuwait's MTC then bought Celtel out of 16 African countries in 2005 and three years later, Mr Merali sold half of his stake to Zain putting 80 per cent of the firm in foreign hands.

Last year, Mr Merali sought exemption and was allowed to sell an additional 15 per cent of his stake - a move that has now come back to Bharti Airtel, the current owners.

The tender specifications have also locked out infrastructure providers such as Kenya Data Networks, AccessKenya, Jamii and Wananchi Group who do not fall within the licence category specified on the tender notice.

Joshua Chepkwony, the chairman of the Telecommunication Network Operators said that while having an open access 4G network was positive, the manner in which the tender document has been structured shows that the government has a pre-determined candidate.

"There is need to call for a stakeholders meeting to explain the desired composition of the consortium because as it is the tender document locks out operators who are not in the tier 1 category but fall within the telecoms ecosystem," he said.

The LTE -- commonly known as 4G --offers subscribers access to mobile internet at much faster speeds, making it a cutting edge tool for companies offering their services on the medium.

The government says it will offer 4G license to a consortium of players that will implement and manage it to avert disputes encountered with the issuance of the 3G licences to the late entrants.

Safaricom paid $25 million for the 3G license fee, only for the government to lower the fee to $10 million for Airtel and Telkom Kenya or 60 per cent less than Safaricom.

Under the new model, the consortium members will be composed of government (the owner of the national spectrum), equipment suppliers such as Huawei, Nokia Siemens Networks, Alcatel Lucent and Ericsson who must team up with telecommunication firms such as Safaricom, Telkom Kenya for expertise and equipment needed for the rollout.

The move comes as mobile operators shift their focus to data, with competition in the voice segments getting stiff and revenue starting to decline with deep tariff cuts that have since August last year lowered the cost of voice calls by 50 per cent.

Safaricom Plans Exchanging Fake Phones at a Discount

Safaricom is considering offering discounted phones to its subscribers who own counterfeit phones ahead of a deadline to switch them off mobile networks.

In a bid to stifle the thriving counterfeit phones trade in the country, the Communications Commission of Kenya has ordered mobile phone operators to switch off all subscribers who are using fake phones from their networks.

Safaricom now says it may offer those subscribers a chance to own genuine handsets at affordable prices. "Switching off is not the solution," Safaricom Head of Consumer Business, Peter Arina, told The Star. The company has admitted to having about 800,000 subscribers using unidentifiable or unverifiable phones.

Typically, a network operator is able to see a phone's IMEI (International Mobile Equipment Identity) number and its unique 10-digit Mobile Identification number. "The first thing is we are going to go to our network and identify them, then we are going to communicate with them," Arina said "We have to let them know, by the way, that phone you have is not genuine or valid for this network."

Safaricom will then offer the subscribers the opportunity to acquire genuine handsets at an affordable price. The company is the also the country's largest retailer of mobile phones. "We will tell them, you can come to the [Safaricom] shop with that particular number and we will give you a discount on a phone," Arina added. "But you have to come with that number that we contacted you with."

By offering to migrate counterfeit phone owners to genuine handsets, the company may strike a crippling blow to the fake phone industry as the majority of subscribers are on its network. Arina said however that Safaricom could not do it alone and would go ahead to meet with the regulator on September 9.

CCK has reiterated that by the end of September operators will have to implement solutions to remove fake phone users from their networks.

CCK Gives KES 2.5 Million Towards Famine Relief

The Communications Commission of Kenya (CCK) has contributed KES 2.5million towards the Kenyans for Kenya famine relief kitty.

CCK's Director of Finance and Accounts Peris Nkonge said CCK was happy to join other corporate organizations in assisting fellow countrymen who are in dire need of food aid in Northern Kenya.

Kenyans for Kenyans is an initiative of the Kenya Red Cross in conjunction with the Kenya Commercial Bank, Safaricom Foundation and the Media Owners Association aimed at raising funds to feed Kenyans in the north of the country.

The initiative, which wound up on 27 August, raised more than KES 600 million through contributions from corporate Kenya, civil society and Kenyans of all walks of life.

Bharti and Vodafone Struggle to Make Money In Africa

For Vodafone Group Plc, Bharti Airtel Ltd. and other phone companies with about $90 billion invested in Africa, making more money from each user in the world’s fastest-growing market is becoming the biggest challenge.

The number of operators is prompting a race to the bottom on call rates. In Tanzania, which has seven phone companies, prices have fallen 90 percent over the past 18 months. Companies also face among the world’s highest “churn” rates, with users frequently changing operators, and patchy infrastructure, all of which make returns on investment difficult.

“It is hard,” said Pieter Uys, chief executive officer of Vodacom Group Ltd., which is controlled by Vodafone and is the largest provider of mobile-phone services in South Africa and Tanzania. “You have to do business in a very different way, you have to build data networks, find other ways to grow revenue.”

Phone operators gathered at Africa’s telecommunications conference that began yesterday in Cape Town want to sell services to the 50 percent of the market that doesn’t have mobile phones. They also want to service current customers more cheaply, without losing user loyalty, while stemming declines in average revenue per user, or ARPU, by offering newer services such as mobile Internet, banking and other money transactions.

“We are now dealing with an ecosystem that’s changing very, very fast,” Andile Ngacaba, chairman of Dimension Data and Convergence Partners, said at the conference. “On the one side, we see this subscriber growth and growth in data and data applications. On the other side, we see this decrease in ARPUs. This requires new models of investment such as infrastructure sharing.”

African Growth

Operators have been lured to the continent by its promise. Africa has a mobile-phone population of about 445 million handsets, according to a McKinsey & Co. report. It took 20 years for the size of the mobile-phone population to reach 200 million, and less than three years to get to the next 200 million, according to the report.

Africa has “become the fastest-growing region in the global cellular market, going from fewer than 2 million mobile phones in 1998 to more than 400 million today,” it said.

The mobile value-added services market in Africa was worth $4.5 billion in 2009, and over the next five years is forecast to grow at a compound annual growth rate of 20 percent, generating $11.5 billion by 2014, Informa Telecoms & Media, a London-based consultant, said in its Rural Connectivity Report in Africa published this month.

Capture Opportunity

About 80 percent of the sales were from messaging, while mobile Internet contributed 14 percent and mobile entertainment such as music and television 3.5 percent, the report showed.

Internet and broadband penetration is still in single digits, Uys said.

“So the possibilities are still there but it’s what you pay for it to get it, the investment in infrastructure,” he said. “If the tariffs are driven too low for whatever reason then it might also not make sense.”

In order for mobile operators to “capture this opportunity,” the market needs consolidation, McKinsey said. “The industry structure should be rationalized, for example, because many markets, even smaller ones, have four or more players.”

Competition on the continent is fiercer now than it has ever been. In the Democratic Republic of Congo and Tanzania, mobile-phone tariffs plunged between 50 percent and 60 percent in the six months through September.

Tumbling Prices

Prices in Kenya have been slashed to such an extent that Safaricom Ltd. Chief Executive Officer Bob Collymore said India’s Bharti, which bought most of Zain’s African operations last year for $9 billion, is losing money on as much as 50 percent of its voice traffic.

Safaricom has an 86 percent share of the market and is 40 percent held by Newbury, England-based Vodafone. Bharti’s head of African operations, Manoj Kohli, declined to comment on Safaricom’s remarks. “We can’t comment on our competitors’ claims,” Kohli said.

On Aug. 18, Bharti halved tariffs in Kenya to 3 shillings, Les Baillie, a spokesman for Safaricom said. Safaricom “knew that voice was always going to become a commodity,” Baillie said. “It was not expected that it would happen so rapidly though.”

Companies are scrambling to adapt their operations to the new climate.

“We have to review our business model and make it leaner and compete on price and have more quality in our network and to have more data,” said Mickael Ghossein, chief executive officer of Orange Telkom Kenya, which is 51 percent held by France Telecom SA. “We have to enhance our quality of networks.”

Sharing Towers

In South Africa, Vodacom, which is 65 percent owned by Vodafone, is investing in data networks. Data now accounts for more than 50 percent of its traffic and is growing at more than 50 percent a year, Uys said.

The company is also pushing smart devices that are able to browse the Internet to low-end segments with touchscreen phones that retail at 499 rand ($73). Once users have an improved mobile-browsing experience, data consumption increases, Uys said

Operators are also sharing infrastructure, especially to reach sparsely populated rural areas where returns on capital invested in infrastructure are low.

Infrastructure sharing and outsourcing of towers has been punted for years. Now, faced with greater competitive pressure, companies are beginning to act.

‘Good Industry’

Last month, Vodafone signed an agreement with Eaton Towers to manage its 750 towers in Ghana. On Nov. 5, American Tower Corp. agreed to buy 3,200 towers from Cell C Ltd., South Africa’s third-largest mobile phone services provider, in a deal worth $430 million.

“We are going to see more and more of those type of deals happening,” said David Lerche, a telecoms analyst at Johannesburg-based Avior Research. “There are lots of little tower companies running around trying to position themselves as tower outsourcers. It’s quite an interesting development.”

For all its challenges, the market is still attractive, Marc Rennard, vice president of Orange Mobile for Africa, Middle East and Asia, said in an interview.

While investor interest has waned a little, “we are profitable, the big players, the five, six main players are profitable,” he said. “It’s still a good industry.”

-Bloomberg

MTN Rebrands UUNet As It Takes On Kenya Market

South African telecoms giant MTN has formally announced its presence in the Kenyan broadband market, two years after acquiring a 60% stake in ailing corporate operator UUNet.

The re-branding of UUNet to MTN Business Kenya looks set to renew rivalry in the corporate data market, a marketplace in which UUNet’s fortunes have declined drastically in recent years.

Internet service providers AccessKenya and Kenya Data Networks have absorbed much of UUNet’s corporate business since 2008, whilst wireless operators Telkom Kenya and Safaricom have both embraced the relatively untapped residential broadband market in a bid to offset declining wireless revenues.

Tom Omariba, managing director of MTN Business Kenya commented: ‘An array of key structures and network transitions has been implemented to deliver standardised service and seamless integration for customers culminating in the official name-change, MTN Business Kenya’.

Dismissing speculation that MTN would try to insinuate itself into the residential market, Omariba continued: ‘You cannot be everything to all customers. We have to look at our strengths and choose which area we can serve. If you try and serve both markets, you will suffer ... that is the experience elsewhere’. MTN Business Kenya’s strategy is expected to involve a substantial cash injection, as well as providing the necessary technical expertise to strengthen its data business and grow its meagre corporate subscriber base, which MTN reported has dwindled to just 700 customers.

Safaricom Plans to Increase Maximum Cash Transfer

CONVERGED communication solutions provider Safaricom has announced plans to increase its deposits in its M-Pesa services, with the aim of enabling its customers to transact larger amounts of money.

The operator plans to increase the maximum amount that a subscriber can transact in a day to
US$ 650, up from the current US$450.

Outgoing Safaricom Chief Executive officer Michael Joseph said the company intends to split M-Pesa into two arms, one for customer-to-customer (C2C) transactions, and the other for customer-to-business (C2B) transactions.

Joseph said the company forwarded the proposed upgrade of its M-Pesa money transfer service facility to the Kenyan Central Bank (CBK), and would commence implementing it as soon as CBK okayed the changes.

He said they had realised that some of the transactions require customers to transfer larger amounts than the current limit of US$450. Safaricom also plans to upgrade the service to link it with the Internet, a move that is expected to enable customers to make M-Pesa transactions online. Currently, transactions are only made through mobile handsets.

Joseph said Safaricom would strive to remain a market leader in the data segment, with M-Pesa remaining its most formidable weapon.

“M-Pesa has become more than just a marketing tool for us in providing services to our subscribers conveniently,” he said.

Close to 300 companies have partnered with Safaricom to settle bills via M-Pesa. Joseph revealed that they were in talks with the CBK for permission to increase the money transfer limits on M-Pesa, which is currently capped at Sh35 000 per transaction.

“We want to take the maximum amount you can transact to Sh50 000 (US$650) and also lower the minimum amount, but all that is subject to CBK approval,” he said without giving a clear timeline on when that would happen.

Adoption of mobile banking has been taking root in the country to speed up access to financial services and reach the un-banked population.

“We are moving close to €150 million (Sh16.5 billion) a day; that’s an incredible amount of money. We are moving more money in a month than what Western Union does,” he said.

Joseph said the mobile market is gearing for a major battle in the control of the customer numbers.
“It is not really a price war; it’s a total war, which Safaricom intends to win not by an inch, or a foot but by a long mile,” Joseph said.

Safaricom’s dominance in the mobile industry has come under pressure by the entrance of Bharti Airtel, Zain Africa’s new shareholders, who have made it clear they are out to attain leadership in the next three to four years.

CCK Extends SIM Registration Deadline, Again

The Communication Commission of Kenya (CCK) has granted Kenya’s mobile phone operators a further two week reprieve in their drive to register the details of the nation’s mobile phone users. The most recent deadline passed on 31 August, and the CCK insisted that the country’s four mobile phone operators - Safaricom, Zain Kenya, Telkom Kenya and Essar Telecom Kenya - file their subscriber listings by 16 September. In the wake of another missed deadline, the CCK has once again extended the exercise, allowing operators until the end of September to lodge their subscriber lists with the regulator. The operators have defended themselves, arguing that the government is still seeking a parliament-approved legal framework to give force to the registration requirement.



According to CCK reports, a total of 12.42 million mobile users have registered their details to date, representing 61.6% of the country’s 20.8 million subscribers. Market leader by subscribers Safaricom is leading the registrations with 13.8 million registered subscribers out of its client base of 16.24 million (85%), followed by Zain with 1.96 million of its 2.8 million subscribers (70%). Rene Meza, managing director of Zain Kenya commented: ‘The exercise is going on well and data is currently being compiled and will be submitted to CCK on September 30, 2010. The figures will then be released by the regulator accordingly.’

SIM Registration Deadline in Kenya Ends, Users Given Upto 16th September

Kenya’s four mobile phone operators will be required to disconnect any subscribers that have not registered their SIM cards by 16 September, it has been announced. The ruling follows the conclusion of the national SIM card registration exercise, whose deadline expired on 31 August.

Information and Communication Permanent Secretary Dr Bitange Ndemo has confirmed that operators have been given 15 days to compile updated subscriber databases following the two-month exercise.

Although disconnections are technically left to the operators’ own discretion, Dr Ndemo suggested that it is in their best interests to do so: ‘If I was to report that someone perpetrated a crime against me and the police went to the operator and find the number is not in their register, then the operator will be held accountable’.

According to the CCK, approximately 80% of subscribers have complied with the government directive. At 25 August market leader Safaricom had registered 84% of its subscribers, Zain Kenya 65%, and Telkom Kenya (Orange) 50%, whilst Essar Telecom reported the lowest rate for registration, with just 29% of subscribers submitting their details.

Based on total subscriber figures and market share per network, this means that around four million of Kenya’s 20 million mobile phone subscribers could find themselves disconnected later this month. Charles Njoroge, Director General of the Communications Commission of Kenya (CCK) said that all operators are obliged to inform subscribers before disconnecting them for non-registration.

Safaricom Choses Huawei For 4G Technology

Safaricom, Kenya’s largest cellco by subscribers, has announced that it will begin technical trials of 4G Long Term Evolution (LTE) technology across its network within the next two months.

Safaricom has selected Chinese firm Huawei Technologies to supply its core network requirements, and to facilitate the rollout itself.

The two companies have signed a three-year strategic partnership worth KES12 billion (USD141.2 million). Speaking during the signing ceremony at Huawei’s headquarters in China, Safaricom's CEO Michael Joseph told the Kenyan Broadcasting Corporation: ‘We are going to do a technical LTE trial on our spectrum to see if it suits the Kenyan market and its commercial viability.

This is completely a technical trial and not a commercial trial and we are going to do the trials within our spectrum in the next two months’. Joseph also said that Safaricom is keen to overhaul its billing system and core network, whilst expanding its 3G network coverage across the country. These upgrades are expected to begin within the next six months and will be completed in two phases.

CCK Consultants Indemnify Safaricom

Safaricom, Kenya’s largest cellco by subscribers, has been vindicated in its battle against stringent new regulations introduced by the Communications Commission of Kenya (CCK).

After Safaricom threatened the regulator with legal action, information minister Samuel Poghisio hired UK consultancy firm Frontier Economics to review the country’s new competition rules. 

 

According to documents viewed by Business Daily, Frontier Economics found key aspects of the contested rules to be out of line with international best practices, and recommended that they be revised or struck out altogether.

Citing the European Commission’s telecom sector competition rules – which stipulate that a player must have at least 40% to 50% of market control to be declared dominant, rather than the 25% figure used in Kenya - Frontier Economics has now placed a heavy burden of proof on the CCK if it intends to act against Safaricom’s dominance. Further, the British consultants have suggested that the CCK cut the 90 days notice clause regarding new tariffs to 30 days, reducing the chance of Safaricom being upstaged by its smaller rivals.

In addition, Frontier Economics suggests that the CCK should lose the power to adjust tariffs independently, recommending that the watchdog should advise the operator about proposed changes without being specific about the mooted tariffs.

Safaricom controls 81.5% of the Kenyan wireless market.

New Intra-network rates Could See Fall In Call Rates In Kenya

Cross-network end-user call rates in Kenya are expected to drop next week when new wholesale interconnection charges (mobile termination rates [MTRs]) are announced, reports the Daily Nation.

The Communications Commission of Kenya (CCK) appointed UK-based strategy consultants, Analysys Mason to study the country’s call rates last month, and the consultancy firm has recommended halving the current fees that cellcos charge one another for terminating calls. Analysys Mason advised the CCK that MTRs should be cut to KES4.42 (USD0.05) in September, and then decreased in phases before being scrapped altogether in January 2014. MTRs have decreased in recent years from KES6.4 in 2007 to KES5.6 (2008) and KES4.72 (2009). According to sources, the CCK will unveil the new rates within the next seven days.

Atul Chaturvedi, country manager of Essar Telecom Kenya, welcomed the move, complaining that the current termination charges make calls to other networks expensive, and lock mobile phone subscribers into networks with cheaper inter-network charges, curtailing market growth.

He commented: ‘We are happy with the recommendations, and hope that the benefits will be passed on to operators and enable us to reduce calling charges’.

Safaricom CEO Michael Joseph criticised the ‘price wars’ that have dominated the Kenyan wireless market in recent years, suggesting that the industry needs effective competition through product innovation and quality of service, adding: ‘We cannot sell minutes at a loss. Let them reduce rates, but it will only be for a short time. A business must make returns’.

Kenya Extends SIM Registration Deadline

The Kenyan government has officially extended the deadline for SIM card registration to 31 August 2010, in order to give Kenyan mobile phone users more time to comply with the ruling.

The exercise, which began on 21 June, has so far seen 12.4 million subscribers register their details, equivalent to a 62% compliance rate. Dr Bitange Ndemo, Information and Communication Permanent Secretary, said that the extension was necessary because operators had expressed ‘dissatisfaction’ over the low compliance figures in rural areas. Dr Ndemo commented: ‘It was decided that because we have not been able to reach the rural interior, where most of our people have mobile phones, we would extend this by another 30 days’.

Dr Ndemo asserted that the Communications Commission of Kenya (CCK) would be intensifying its registration campaigns in such areas, warning that no further extensions would be issued. Subscribers who fail to register their SIM cards will have their lines disconnected.

As at the original deadline (30 July) 71% of Safaricom’s subscriber base (or 11.3 million) had registered, 54.2% of Zain Kenya customers (one million), 7% of Essar Telecommunications Kenya (ETK/Yu) subscribers (110,013) and 4% of Orange customers (36,907).

CCK Insists On SIM Registration Deadline

Safaricom Plans Two Acquisitions

Safaricom released a statement today, expressing their intention to acquire ownership of two information communications technology (ICT) companies, namely IGO Wireless Limited and Instaconnect Limited.

This intended acquisition by Safaricom is subject to receipt of shareholder approval at the next Annual General Meeting and to statutory approvals from the Communications Commission of Kenya, the Monopolies and Prices Commission and all other relevant approvals.

IGO Wireless Limited is a licensed Public Data Network Operator engaged in the operation of fixed wireless data services while Instaconnect Limited is licensed as an Application Service Provider engaged primarily in the integration of data solutions.

Both companies are active players in the ICT market and the intended acquisitions are pursuant to Safaricom’s stated strategic objective of enhancing its ability to grow its data business.
Safaricom expects to finalise these acquisitions this financial year.

Mobile Money Transforms Lives In Developing World

Mobile banking has transformed the way people in the developing world transfer money and now it is poised to offer more sophisticated banking services which could make a real difference to people's lives.

Currently 2.7bn people living in the developing world do not have access to any sort of financial service. At the same time 1bn people throughout Africa, Latin America and Asia own a mobile phone.

As a result, mobile money services are springing up all over the developing world. According to mobile industry group the GSMA there are now 65 mobile money systems operating around the globe, with a further 82 about to be launched.

Most offer basic services such as money transfers, which are incredibly important for migrant workers who need to send cash back to their families.

M-Pesa in Kenya is perhaps the most famous of these and it has attracted 9.4 million Kenyans in just under three years.

Now it is ready to move to the next stage. M-Pesa, has recently partnered with Kenya's Equity Bank to offer subscribers a savings account, called M-Kesho.
 
Money Matters

It means their M-Pesa accounts will no longer be just about money transfer. Instead, they will become virtual bank accounts, allowing customers to open saving accounts, earn interest on their money and access credit and insurance products.

It is an extension to an earlier agreement with Equity Bank to allow M-Pesa customers to access their funds at ATMs around the country.

CGAP, a financial think tank based at the World Bank, was at the launch of M-Kesho.

"Kenya is sending a message to the world: poor people want savings accounts. Mobile banking is a powerful way to deliver savings services to the billion people worldwide who have a cell phone but not a bank account," said CGAP chief executive Alexia Latortue.

Meanwhile in Uganda, MTN, a mobile firm that runs a similar mobile money service has ratcheted up 890,000 users in its first year of operation. This is double what it forecast.

Richard Mwami, head of mobile money at MTN predicts the service will have 2m users by the end of the year, and 3.5m by 2012.

He admits that one of the biggest challenges of setting up the system was regulating the agents that provide the cash.

"We have had liquidity problems where customers walk into the shop and there is no money," he said.

And fraud is also a problem, running to one or two cases every couple of weeks. Some 60% of users live in rural areas, where literacy rates are low and agents are often local shopkeepers, authorised to take deposits and issue cash.  "There is ignorance about how the service works," he said.

MTN has now begun an education programme, promoting and explaining the service on national radio.
Uganda, mobile money Only 38% of Ugandan citizens have a bank account. Micro-economy

Gavin Krugel, head of mobile money at the GSM Association (GSMA) believes agents are more trusted than traditional banks.

"Banks have revolving doors and armed security guards. Consumers believe they are for the rich only," he said.

By contrast, agents tend to be trusted retailers who have been selling airtime to the same customers for the past ten years.

"Every one of the agents are trained and those that misbehave are taken out of the system," he said.

Aletha Ling, executive director of Fundamo, the platform behind MTN Uganda's mobile system, said the challenges are worth it because it is easy to see how it is benefitting customers.

"Money gets sent from the cities to the rural areas where it is required. Less cash passes hands so it is much more secure. Previously people were travelling with huge amounts of money," she said.

"In one fishing village I visited it had created its own micro-economy," she said.

In Uganda the banking population is low with only 38% having a bank account and only 7% using more than one banking product.

Mobile banking can also provide a route out of poverty, according to the newly-appointed UK International Development Secretary Andrew Mitchell.

Speaking at the GSMA's mobile money summit in Rio de Janeiro this week he said:

"Access to basic financial services - the ability to save, transfer and invest even small amounts of money - can make a huge difference to people around the world. It can help a farmer to survive a bad harvest, or provide a slum-dweller with the vital capital needed to start a small business,"

This is a view echoed by Mr Mwami.  The mobile phone is demystified. People are confident about using it and the market is there for the taking," he said.
Disruptive technology

Last year Bill Gates pledged $5m to help the world's poor access banking accounts. The Mobile Money for the Unbanked Fund is being administered by the GSMA Foundation.

It has announced the projects which will benefit from the money.

It includes Bangladesh's Grameenphone which hopes to enhance its mobile money service with services such as a mobile ticketing service for Bangladesh Railways.

Money will also go to Orange Money to introduce more advanced financial services in Western Africa, where less than 4% of the population have banking.

Safaricom, the mobile firm behind M-Pesa, will get a grant to help non-government organisations and the Kenyan government get much-needed money to vulnerable households in informal settlements in Nairobi.

In Cambodia, the majority of payroll is given in cash and Cellcard is hoping to set up money transfer, bill payment and airtime top-up to urban migrants desperate to send money home to famiies in rural areas.

Similar projects in Pakistan, India, Sri Lanka and Fiji will also also benefit from the fund.

Mobile banking is a slow burn, said Mr Krugel, but a potentially revolutionary one as long as it is born from what consumers ask for.

"In many of these markets offering a fully-fleged bank account would be a waste of time. Consumers need to understand the basics first," he said.

"At first they don't trust the system. Then they can see that it works and eventually they start to leave some money in their account. This is how they start lifting themselves out of poverty," he said.

The next stage is more sophisticated services such as funeral or hospital insurance.

"In African culture, for example, they believe strongly in respect and funeral insurance is extremely important," he said.

Traditional banks are now beginning to wake up to the threat posed by mobile services and are increasingly partnering with the mobile firms to tap the potential of a whole new market.

"M-Pesa was sufficiently disruptive that it forced the banks to respond. If the banks do see these services as a threat they will realise there is opportunity at the base of the economic pyramid and that is a job well done by the mobile industry," said Mr Krugel.

- BBC Online

MTN Mobile Money Helps Revolutionise Money Transfer

Few Ugandans have access to a bank branch or an ATM. But most do have a cellphone within easy reach - and this reality is driving the world's fastest-growing mobile payments service, MTN's Mobile Money.
Launched in March 2009, the service has attracted 890 000 MTN subscribers, says MTN Uganda's head of mobile money, Richard Mwami. The number of users will hit 2m by year-end and 3,5m - more than one in six MTN Uganda subscribers - by 2012, he predicts.

MTN's benchmark is UK mobile network operator Vodafone's M-Pesa service, offered by Kenyan operator Safaricom. With 9,5m users - 40% of Kenya's adult population - M-Pesa is described by GSM Association, the global mobile network operator body, as the world's most successful mobile payments service.

After one year, adoption of MTN Uganda's payments service exceeds that of M-Pesa at the same stage, says Reg Swart, senior vice-president of Cape Town-based Fundamo, technology supplier to MTN's project. Over US300m in transactions have already been processed, he adds.

A key factor in the Uganda success is marketing through 2500 representatives, says Mwami. Direct contact and educating subscribers are critical to growing the service. Also vital is easy access to cash remitted to users, or enabling them to convert cash into e-money, he says. This is achieved through agents such as village shop owners. Mwami says it is "a good proposition" for agents. He explains they earn commission on transactions and receive liquidity management assistance from MTN's banking partner, Standard Bank's Stanbic Bank Uganda unit.

Safaricom Profits Up 44%

Safaricom, Kenya’s largest mobile network operator by subscribers, said full year profit jumped 44%, as revenue from data services - including its mobile money transfer service MPESA - increased. Net income climbed to KES15.15 billion (USD190 million) in the twelve months to 31 March 2010, from KES10.5 billion a year earlier.

Sales climbed 19% to KES83.96 billion. Safaricom, which is 40% owned by Vodafone, competes with Telkom Kenya, Zain and Essar Telecom Kenya; at the end of March it claimed 15.79 million customers.

Equity Bank, Safaricom Launch M-Pesa Bank Account

Kenya's Equity Bank and Safaricom have launched a bank account that lets customers transfer money to and from accounts of the mobile operator's money transfer service M-Pesa via their mobile handsets as well as enjoy other benefits that come with a bank account. The new service will target customers who are looking for the convenience of a bank account that uses M-Pesa as the tool to deposit money into their accounts. Customers will not have to go to the bank to check their account balances. The mobile system will allow the customer to check their last five transactions on their linked account.

With the M-Kesho Account, customers will be able to get pre-qualified personal accident insurance, access to short-term loan facilities ranging from KES 100, and interest on the mobile account from as little as KES 1.
The application is built with the ability to score a customer's credit rating using a six-month history of his M-Pesa balances. The customer can request the facility through his phone, and the bank will respond if approved by loading the money into his M-Kesho Account. Customers will also be able to apply for short-term credit from their handsets.

The partners intend to carry out media promotions on these services to educate customers on how to register for the M-Pesa Equity Bank Account. M-Pesa agents will be encouraged to offer these services in their outlets to further supplement their commissions. The product is currently available in four agent locations with plans to roll out to over 5,000 in the next few months. The account targets the over 4.5 million Equity Bank and over 9.5 million M-Pesa customers looking to link the two services.

The two firms have previously offered all registered M-Pesa customers the ability to withdraw M-Pesa from the over 550 Equity Bank ATMs.

Kenya To Introduce Mobile Number Portability From July

 Kenya's telecoms regulator has announced that the country's four mobile networks will be required to start supporting Mobile Number Portability from this July. The regulator has been planning to offer MNP in the country for several years, but kept deferring the plans.

The plans, originally announced in 2004 were put on hold in 2007 after the regulator cited the high costs of implementing the system. They were then resurrected in late 2008 for launch between March and September 2009. It now seems likely that the launch will finally occur in the middle of this year.

Subscribers will be charged an administrative fee for each time they port their number to a new operator, although the fee is still to be worked out with the operators.

Typically in most countries where MNP has been introduced, the smaller players tend to see a short-term jump in subscriber numbers at the expense of a dominant player - in this case, Safaricom.

The Mobile World subscriber database reports that Safaricom is the market leader with a market share of 82% with Zain  coming in at 11.3%. Newer entrants, Econet had 2.3% of the market while Orange (Telecom Kenya) had 4.1% of the market.

The regulator has also commissioned Analysys Mason to conduct a study into the market for wholesale and retail termination rates. The operators have until 7th May to respond to the survey.