1. Rotary Club Strategic Telecoms Investment Opportunities Richard Gitonga

2. Myths & Facts

3. Myth: The Telecommunications Industry is growing Fact: True, but ARPUs are declining

4. Myth: Safaricom is by far the most dominant player Fact: Yes, but only in the mass market retail segment

5. Myth: This is a great time for ISPs to expand their reach and coverage Fact: This is a great time for them to overhaul their business model

6. Myth: Invest your money in Telcos Fact: Invest your money in CSPs and VAS models

7. Myth: BPOs are a great place to invest in the long term in line with GoK 2030 vision Fact: Kenya does not have a comprehensive, competitive and executable ICT strategy; What efforts is GoK making?

8. Snapshot of ICT Varying Customer segments Convergence Regulatory: Ex-Ante to Ex-Post Consolidation Declining GoMs/ARPUs Non-traditional competition Human capital challenges

9. Mobile market Key facts Fact 1: Numbers are growing with low ARPUS Fact 2: Revenues based on Voice only Fact 3: Need to add VAS so as to sustain and increase ARPUs Mobile revenues & penetration Local currency, %population Fixed revenues & penetration Local currency, %household Revenues Penetration rate Fixed market Key facts Internet revenues & penetration Local currency, %household Internet market Key facts  Fact 1: Dominated by one monopolistic player but threat of new SNO entrant.  Fact 2: Plagued by excessive incidence of vandalism and poor network quality.  Fact 3: Faces revenue declines due to competition from mobile and wireless Fact 1: Increased penetration with more access solutions, e.g. ADSL, EVDO, etc. Fact 2: Increased consumption due to reduction in per unit costs Fact 3: Support from GoK ICT policy – “One laptop per child” Trends in the Kenya Market (2005-2010) Penetration rates & revenues evolution Revenues Penetration rate Revenues Penetration rate

10. Mobile market evolution Trends 1: Price wars have brought down prices coupled with Regulation price caps introduced by CCK Trends 2: Higher growth on prepaid subscriber (mass market) Trends 3: ARPUS declining faster than for fixed Mobile prepaid ARPU Fixed market evolution Trends 1: Drastic reduction in international traffic due to cheaper rates from global competition Trends 2: National traffic has remained constant Trends 3: Broad Band expected to boost growth on fixed line Internet market evolution Trends 1: Demand expected for higher speeds especially by Corporates & SMEs Trends 2: Usage expected to increase as tariffs come down in a more competitive market Trends 3: Need to expand bandwidth to carry more volumes Fixed ARPU Data ARPU Trends in the Kenya Market (2005-2010) & ARPU trends

11. From Ex-Ante to Ex-Post Regulation Unified Licensing Framework ICT Bill 2008 – Convergence – Postal Services, Telecommunications & Broadcasting Universal Service Obligations Number Portability

13. Changing demographics and psychographics are bringing disruption to the Telecommunications industry

14. Regulatory environment- Mobile and Fixed Termination Rates Evolution Mobile and average national fixed termination rates evolution Ever wondered what happened to LLO business models like Flashcom and Popote Wireless?

15. Country competitive landscape Services*Operator Mobile 1 2 4 3 Access network Wholesale access Fixed Services* No or limited assets Market Overview Convergence of fixed and mobile services Consolidation is taking place: Safaricom has partnered with One Comm to offer data services Traditional services remain key - voice - fix & mobile Emerging tactics indicate operator shift to Broadband services to improve ARPUS. Jamii Telcom

16. Age of Convergence -Technology Neutrality

17. Strategic Options & Thoughtstarters

18. Emerging ICT Opportunites e- government e-medicine e-education e-commerce e-banking Video conferencing Wide area networks ICT Villages Payment Gateways

19. Tiered Examples GoK – National Fiber Infrastructure & GCCN (GoK Common Core Network) Telkom Orange & SFC – MPLS & 3G Networks Access Kenya – WiMax Wireless Infrastructure and Fibre I&M Bank – E-Commerce Visa Payment Gateway Cellulant – M-Commerce Payment Gateway Cisco - Video conferencing Kencall - BPO Elimisha Online – Online retailing and E-Learning

20. Opportunities to Explore Payment gateways & Integration Cloud Computing Online security Online retailing & E-Marketplaces Content Service Provider Digitization of existing material Consultation in E-Business Modelling ICT Law Specialization

22. Thank You