Safaricom shifts funding to catch up on fixed-data demand

By Reuters/Duncan Miriri

Kenya’s Safaricom is reallocating funds to build up its fixed-data network to connect homes to the Internet, as demand grows for online streaming services like Netflix, chief executive Bob Collymore told Reuters.

The fixed-data market in Kenya is dominated by Wananchi Group’s Zuku brand and Jamii Telecoms.

Safaricom, Kenya’s biggest telecoms company, has until recently been focusing on mobile Internet access. It is 40 percent-owned by Britain’s Vodafone.

“We have been a bit lazy in growing our data business,” Collymore said.

Safaricom’s Internet provision business grew by about 40 percent in its first half to the end of last September. That was well below the 52 percent growth rate for other African operators and 62 percent in the rest of the world.

Collymore said its investments in the fixed data network were a reallocation of its budget and would not add to its planned capital expenditure.

Safaricom’s capital expenditure in its year to end March is 32 billion shillings ($310 million), Collymore said, without giving a breakdown. “The big investment is in fibre.”

“We are certainly putting more in fibre than we thought we would do … It is a change in priorities,” he said.

Collymore said Safaricom had already connected 6,000 homes to its new fixed-data network, using fibre and poles.

“That is a cheaper way of delivering the data requirements of homes because ideally you want to have unlimited data,” he said in an interview on Friday.

He said the move was driven by growing local demand to download or stream content such as the science fiction drama Sense 8 on Netflix.

“We want to give people solutions they can use to access a Netflix movie or a ShowMax movie, not just on the TV, on Tablet or on phone,” he said.

ShowMax, owned by South Africa’s Naspers, is an Internet-based video service that has partnered with Safaricom to recruit new customers in Kenya.

Safaricom spent $25 million on a license for the provision of fourth generation (4G) Internet and it has rolled out the network to Kenya’s major urban centres.

It also has 2G and 3G networks running in parallel for customers who do not have smart phones that can accommodate faster speeds and for customers in the rural areas.

Collymore said Safaricom was keeping its earlier guidance of 97 billion shillings in earnings before interest, tax, depreciation and amortisation (EBITDA) in its financial year to the end of March.

“The second half is in line with our expectations,” he said.

($1 = 103.8500 Kenyan shillings)