Rise of e-commerce in Kenya ‘challenging traditional sectors’, says report

Subscriptions to mobile telecoms services increased by nearly 33% during the first quarter of Kenya’s 2015-16 (July-June) financial year and the market now has a penetration rate of almost 90%, according to the Communications Authority of Kenya’s (CA) quarterly sector statistics report (28-page / 1.92 MB PDF).

At the end of the first quarter, in September 2015, there were 37.8 million subscribers, up from 36.1 million in the previous quarter, the report said.

The number of internet users in Kenya grew to 31.9 million, from 29.6 million in the previous quarter, the report said. “Consequently, the portion of the Kenyan population accessing internet services reached 74.2 per 100 inhabitants up from 69 per 100 inhabitants recorded in the previous quarter,” it said.

Mobile money transfer service subscriptions increased to 28.7 million up from 27.7 million in the previous quarter, with 135,724 registered mobile money agents compared to 129,357 in the previous quarter, the report said.

By contrast, in Kenya’s postal and courier sub-sector the number of letters sent locally “declined significantly” by 17.2% to 12.9 million, down from 15.6 million letters sent during the previous quarter, the report said. However, the number of international incoming letters rose to 2.4 million, an increase of 10.8% from the previous quarter. “Similarly, international outgoing letters increased to 1.37 million up from 1.35 million letters sent during the previous quarter,” it said.

The CA said: “The postal and courier sub-sector continues to contend with stiff competition from the telecommunication sub-sector that has continually launched new products and services thus hiving market share from the former, shrinking its growth prospects. Emergence of new markets such as e-commerce will present a prime opportunity for the market to make a turnaround and begin to record growth as it provides physical delivery services for online transactions.”

“The mobile telephony service experienced an upward trend in terms of subscriptions as well as local voice and SMS traffic,” the CA said. “Fixed network on the other hand maintained a downward trend in terms of subscriptions and local voice traffic. This trend could be as a result of the decommissioning of fixed wireless network by Telkom Kenya, increased competition from the mobile sector, vandalism of copper networks and high infrastructure costs associated with the service.”

In 2015, the CA signed an agreement with the World Bank’s International Finance Corporation (IFC) to promote competition and investment in Kenya’s telecoms sector and strengthen the regulatory environment.

The CA said the agreement was part of the IFC’s ‘Kenya Regulatory Reform Programme’, which provides advisory services to help boost the development of the private sector in the country.

According to the IFC, “Kenya’s M-Pesa is one of the most well-known mobile money operators in the world and is used by over 70% of Kenyan adults”.

Research published last November by market analysts Ovum, the number of mobile broadband connections in Africa will reach one billion in 2020, up from 147 million at the end of 2014.

Ovum said its ‘Digital Media Opportunity Index: sub-Saharan Africa’ (17-page / 752 KB PDF) showed that that while some players have left the market “others are entering or expanding in the African telecoms market, bringing new investment”.

South Africa ranked highest on the index with a score of 4.35 out of 5, Ovum said. South Africa was followed in the digital media opportunity rankings by Angola (3.09), Kenya (2.97), Nigeria (2.89) and Ghana (2.85).