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Kenya: Cash Transfer Next Frontier for Phone Firms
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Business Daily (Nairobi)
13 May 2008
Posted to the web 13 May 2008
Steve Mbogo
Money transfer service via the mobile phone is seen as the next investor hotspot, signalling fresh competition in Africa's cell phone industry in a battle which includes mobile, television and music.
But Africa telecommunications industry players are warning that information technology skills are scarce in Africa, necessitating the need to import skilled work force into the continent.
These opportunities are emerging at a time when there is continued efforts to connect the African continent to the submarine fibre optic cables in the next three years. The submarine cables will offer cheaper and faster bandwidth that will necessitate speedy transfer of data, voice and video.
"The cables will lead to a tipping point in Africa's telecommunication industry," said Russell Southwood, the chief executive of South African IT research firm, Balancing Act.
There are several initiatives going on to link all the African regions with fibre optic cable. When this happens, the cost of bandwidth is expected to fall to between Sh32,500 -Sh65,000 ($500-$1,000) per megabyte per month depending on the provider.
In Kenya, the cheapest dedicated one megabyte of bandwidth costs Sh280,000 ($4,000) . Although Safaricom's M-Pesa pioneered the global money transfer service and the company recently launched a mobile TV, more bandwidth opportunities are expected next year when the first of the three initiatives to link the country with fibre optic is completed.
The East African Marine System (TEAMs) will be completed early 2009. Others are EASSy that will link eastern and southern African countries along the Indian Ocean and the private-sector led Seacom.
Mobile telephone services providers are also revising their penetration targets in the view of expected jump in bandwidth volume. Analysts say this expectation is also attracting foreign investors into telecommunications despite the current global financial recession.
Kenya is already gaining from France Telecom's buyout of 51 per cent of Telkom Kenya for about Sh25 billion and through foreign investors who have invested in the Safaricom initial public offering. Econet Wireless is also expected to roll out its services soon.
In South Africa, Bharti Airtel, India's top mobile phone firm has bid for 51 per cent of South African telecommunications group MTN, valuing the firm at $37 billion.
The South Africa industry players welcomed regulatory changes that have now allowed growth in the sector. But there are concerns that in some countries, licences are being issued just to generate money for the governments and not because the consumers need additional providers.
Analysts say, in markets where more than two providers were operating with enough subscriber base, there was a higher level of innovation that in markets where only two dominant providers exist.
But Africa lacks adequate IT manpower to manage the existing and emerging opportunities in the continent. Industry players say governments should relax rules on IT labour imports into the country. The continent also needs to work with the private sector to develop IT academies.
Donglin Shen, vice president of Chinese telecommunications equipment maker, said China's competitive edge in IT is because of the two million engineers who graduate from university every year. Other concerns were that about 25 African governments have imposed luxury tax on airtime while eight apply similar tax on mobile phone handsets.
ICT Indicators 2008 report launched noted that mobile telephone penetration has risen from just one in 50 people at the beginning of this century to almost 33 per cent of the population today. Mobile subscribers are also more evenly distributed. In 2000, South Africa accounted for over half of all Africa's mobile subscribers, but by 2007, almost 85 per cent were in other countries.
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The report estimates that there were some 50 million Internet users in Africa in 2007, which translates into around only one person among 20, but only two million fixed broadband subscribers in Africa 2007.
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