Boston, MA -- (SBWIRE) -- 01/09/2014 -- Recent developments in the telecoms market support our view that Kenya's telecoms service providers will prioritise high value services to offset the impact of declining revenues from traditional voice services. Some key areas that service providers are diversifying into include cloud computing and converged services. Demand for these services will be driven by the steady growth in economic activity and the uptake of IT solutions by the country's small and medium-sized enterprises. We expect operators with resources to invest in next generation fixed-line access technologies to take advantage of the opportunities in these areas, although their services will be limited to urban areas where less than 30% of the population live.

Key Data

- Kenya's mobile market grew by 2.3% q-o-q in Q213 to partially offset a decline of 2.9% in the previous quarter.
- Mobile ARPU appreciated by 4.3% in H113, consolidating on 7.8% y-o-y growth in 2012.
- The fixed-line sector contracted by 2.2% in Q213 and 17.6% in the 12 months to June 2013.
- The number of internet users in Kenya increased by 19.5% in Q213 and 61.2% in the 12 months to June 2013.

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Risk/Reward Ratings

Kenya is ranked 10th on BMI's Q114 Sub-Saharan Africa telecoms Risk/Reward Ratings, unchanged from the previous quarter. The country scores above average in three out of the four categories on our ratings table. Kenya's mobile telecoms market is one of the most dynamic in the region, but it is held back by low ARPUs in the mobile sector and limited network coverage in the fixed-line sector. We forecast Kenya's headline economic growth will reach 6.1% in 2013 and 6.2% in 2014. One of the key drivers of this view is BMI's belief that consumer spending in Kenya will increase over the coming years. The country already has one of Africa's most sophisticated economies, and we predict that rising incomes will see increased demand for the goods and services related to the rise of middle class consumers.

Key Trends & Developments

Competition in Kenya's pay-TV market is set to increase significantly in 2014 following announcements by two of the country's leading telecoms services providers to launch internet and TV bundles during that year. In November 2013, mobile market leader Safaricom and fixed data services provider Liquid Telecom Kenya announced plans to launch IPTV and high-speed bundled internet services to residential customers. BMI believes that the entry of new players will drive service innovation and competitive pricing. However, we note that poor fixed network coverage as well as operators' focus on high-end customers could prevent mass uptake of the new services in the short to medium term.

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