Kenya Power Starts Selling Fixed Internet

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Kenya Power Starts Selling Fixed Internet


Energy workers in Kenya. profile picture | NMG

John Mutua MG

Summary

  • This is a step forward by the electricity distributor, which has leased fiber-optic cables connected to transmission lines to Internet service providers.
  • In the coming weeks, the tool will announce a package that will allow its corporate customers to buy internet and electricity as a package after conducting beta tests with larger power users.
  • Kenya Power believes it will offer affordable packages to gain market share, indicating a price war in the telecoms market as operators view data as a new growth frontier.

Kenya Power #ticker: KPLC will start selling high-speed internet to businesses in the race to diversify their revenue and take advantage of the country’s growing data usage.

This is a step forward by the electricity distributor, which has leased fiber-optic cables connected to transmission lines to Internet service providers.

In the coming weeks, the tool will announce a package that will allow its corporate customers to buy internet and electricity as a package after conducting beta tests with larger power users.

This will take the internet customer battle to Safaricom #ticker: SCOM, Wananchi Group (Zuku) and Jamii Telecoms which control 85.1 percent of Kenya’s fixed data market.

“We will provide our corporate customers with a combined service of electricity and the Internet,” Kenya Power said in a statement. The daily business.

“Kenya Power will leverage our extensive network to take advantage of the market…We will offer companies the option of using the internet for their primary or recurring use.”

Kenya Power believes it will offer affordable packages to gain market share, indicating a price war in the telecoms market as operators view data as a new growth frontier.

Over the past five years, Safaricom has spent billions of shillings building a fixed data network to connect homes to the Internet, with the demand for online streaming services such as Netflix growing.

It has connected thousands of homes to its own fixed data network, using fibers and poles that have seen it overtake Zuku and Jamii Telecoms to be the market leader.

In the next three to 10 years, the utilities will seek to sell internet directly to homes, targeting rural homes.

The two plans appear set to alarm Internet Service Providers (ISPs) who have been riding the Kenyan power grid to sell data, giving the electricity distributor a head start in the race for rural Kenya as it will install its own transmission network to connect fiber-optic networks to homes.

Internet service providers rely on Kenya Power’s extensive power transmission network to reach nearly eight million electricity customers and dramatically reduce costly infrastructure support costs, including trenching for underground cables.

In 2010 Kenya Power signed a 20-year lease agreement worth Sh421 million with Safaricom for the use of a pair of fiber cables.

It has also done deals with telecom companies Wananchi Group and Jamii Telecoms with each signing five-year lease contracts worth a total of Sh403 million.

Telecom industry players see fiber optic cable as a way to save costs associated with satellite connections and avoid sabotage-prone copper wire connections.

Initially, Kenya Power envisioned fiber optic cabling as a tool to improve its monitoring of the network.

But internet providers have taken some relief from their fiber optic network because vandals may not be able to access it because it is located over live power cables.

Kenya Power received Sh290 million from its fiber lease in the six months to December, a marginal drop from Sh315 million booked in the same period a year earlier.

The extensive network of fiber cables connected to its transmission lines will give Kenya Power the lowest entry cost into the fixed internet market compared to companies like Safaricom.

Kenya Power had 8.59 million customers in December, including 404 and 800 small businesses and large industrial customers.

Data from the Communications Authority (CA) shows Safaricom controlling 37 percent of the market or 284,420 home and office connections, followed by Waanchi-owned Zuku with 29.4 percent or 224,124 connections.

Jamii Telecoms is the third largest player in the market with a share of 18.9% (145,337 connections) while Poa Internet has 69,906 connections (9.1%).

CA says the fixed internet market is largely untapped, providing telecoms companies and Kenya Power with an opportunity to increase revenue.

Demand for a steady internet has soared in the wake of the coronavirus as people work from home and schools embrace e-learning.

“Looking at the business landscape, the opportunities are huge and open to everyone,” says Kenya Power. It expects revenue from selling data to its corporate clients to diversify income and help it meet the challenges facing its electricity division.

As the country’s sole electricity distributor, Kenya Power faces a host of problems, including deliberate sabotage and blackouts linked to aging infrastructure and rising operating costs amid pressure from the state to lower consumer tariffs.

Kenya Power reported a net profit of Sh3.8 billion in the six months to December, compared to Sh138 million in the same period a year earlier.

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