A GLOBAL/ COUNTRY STUDY AND REPORT ON TELECOM SECTOR OF THE KENYA Submitted to MARWADI EDUCATION FOUNDATIONS OF INSTITUTIONS, RAJKOT

IN PARTIAL FULLFILLMENT OF THE REQUIREMENT OF THE AWARD FOR THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION IN Gujarat Technological University UNDER THE GUIDANCE OF Prof. Hemali Tanna (Assistant professor)

Submitted By Soyabmahamad Hina Ranpariya Sagar Chotai

Enrollment No. 117340592173 117340592175 117340592176

[Batch: 2011-13] MBA SEMESTER III/Iv

Marwadi Education Foundations of Institutions, Rajkot Affiliated To Gujarat Technological University, Ahmedabad April 2013

STUDENTS DECLARATION

We, Soyabmahamad, Hina Ranpariya, & Sagar Chotai, hereby declare that the report for Global/ Country Study Report entitled TELECOM SECTOR OF THE KENYA is a result of our own work and our indebtedness to other publications, references, have been duly acknowledge.

Place: Rajkot Date: _______

Soyabmahamad Hina Ranpariya Sagar Chotai

____________ ____________ ____________

PREFACE
In todays era of global business activities, we can understand that all of the countries are trying to become a global one. So they are connecting their business activities with the countries of the world. And from the earlier system of bartering the goods, monetary aspect has been synchronized and modern business system has been established. We know that, majorly trades are done for goods and services. And for that all countries are generating exports as well as imports. From this, country can be able to earn foreign exchanges and it will be helpful to grow the economy of the country. There are majorly three kind of divisions are made according to the economy of the country i.e. developed country, developing country and under-developed country. Each underdeveloped countries of the world will consume the resources and become developed gradually. These African countries are coming under under-developed stage and Kenya is one of them. Here according to our title, we are going to get highlights of major trading partners of Kenya, in which we get the knowledge of countries with whom Kenya is dealing and getting different goods, the quantity of the goods as well as how it is affecting to the economy of Kenya. As far as Kenyas trade is concerned, India is one of the major partners of it. So we will get more emphasized detailed study regarding the dealings and business transaction of Kenyan economy with Indian economy. And so we will understand that importance of their different growth related to different exports/imports of goods and services included with Indian transactions.

ACKNOWLEDGEMENT
It is a moment of pleasure that to present this report undertaken by us as country research of Kenya for the part of our Master of Business Administration. Having completion on the moment of the partial project work, we realized the importance of the people who have supported us. First of all, we are giving credit of our work to the dean sir of our MBA Department of our college, Dr. S.C. Reddy. He has allotted us this great work, which can be a part of our overall growth of the knowledge along with professional opportunities to work outside India. We would like to express our gratitude to our guide, Prof. Hemali Tanna for helping us at all the moment of difficulties. She has put her time and efforts along with us without considering her personal inconveniences or pressures of her other works. So we are sincerely thanking her for the same. Here in this work of group efforts, how can we forget the activities of our group member? So we, the members of our group are thankful to each other and we achieved the experience of team work, which we can utilize for our further carrier in our life. We have utilized the helping resources for accumulation of the data and other necessary information. For that todays smart technological environment and other equipment have played vital role for partial completion of this global country report on Kenya. Today world has become just like the global village that no places are remaining without the touch of the technology. And we have taken benefits of the same.

CONTENTS
INTRODUCTION .................................................................................................................................................. 1 PHENOMENAL MOBILE PHONE GROWTH ................................................................................................. 4 MARKET SIZE OF KENYA ................................................................................................................................ 4 INTERNET DEVELOPMENT ............................................................................................................................. 5 KENYA EXPANDS BROADBAND NETWORK.............................................................................................. 6 HYSTORICAL EVOLUTION............................................................................................................................... 7 BUSINESS ACTIVITIES OF TELECOM SECTOR ........................................................................................ 9 COMPARISON OF TELECOM SECTOR OF KENYA WITH INDIA ......................................................... 17 PRESENT POSITION AND TREND OF BUSINESS ................................................................................... 23 POLICIES AND NORMS................................................................................................................................... 23 POLICIES AND NORMS OF KENYA FOR TELECOM SECTOR ............................................................. 25 GOVERNMENT POLICY ON ICT SECTOR .................................................................................................. 29 RECENT POLICY CHANGES IN INDIA AND THEIR IMPACT ................................................................. 30 BUSINESS OPPORTUNITIES ......................................................................................................................... 28 BUSINESS OPPORTUNITIES IN FUTURE .................................................................................................. 31 CONCLUSIONS ................................................................................................................................................. 33

KENYA TELECOM SECTOR

INTRODUCTION
The telecom services have been recognized the world-over as an important tool for socioeconomic development for a nation. It is one of the prime support services needed for rapid growth and modernization of various sectors of the economy. The Kenyan Information and Communication Technology (ICT) sector is poised for a technological explosion in future as the government is bracing itself to supply the human resources, legal structures, finance and infrastructure in order to support ICT initiatives. Also, all the technology-related equipments are readily available in the country due to the presence of distribution centers of various technology and hardware manufactures. Since the beginning of the liberalization of the telecommunications sector in 1999, Kenya has seen fast internet growth and even faster mobile phone growth. Encouraged by this development, the government has plans to turn Kenya into east Africas leader in information and communication Technology (ICT). Since 1999, Kenya has experienced radical changes as the liberalization process of the telecommunications sector began. Of vital importance to the process was the establishment of the communications commission of Kenya (CCK) in February if the same year through the Kenya communication acts, 1978. CCks role is to license and regulate telecommunications, radio communication and postal services in Kenya. Since then a visible boost has gripped the industry.

Spectacular failure of many national economies in Africa and Asia under nationalization and central planning makes the Kenyan case of wide interest and significance for those
1

concerned with development strategy. The economic role of the telecommunications sector in Kenya has been the subject of significant economic and business research. Based on that research and on a series of field interviews carried out in June 1991, we have drawn several conclusions: Expanding the scope and enhancing the quality of the telecommunications services offered to rural and urban businesses yields economic benefits far in excess of the costs incurred. Despite major expansion of the public network during the 1980s and early 1990s, there are still un-served or underserved user requirements of major economic significance; there are large direct and indirect benefits in foreign-exchange earnings to be derived from improving telecommunications services; these benefits are particularly valuable to a country like Kenya with an economy strongly linked to international trade. The challenges faced by the makers of telecommunications policy in Kenya are exceptionally demanding. To meet of economic needs, it will be necessary to expand the network, enhance service quality and features, and upgrade operational efficiency and productivity. Kenya has a rapidly expanding economy, but also has one of the world's highest population growth rates--by the year 2000 its population is expected to reach 38 million. Kenya will also need to invigorate agriculture and enhance the lives of those in its rural areas to stem the tide of migration into the towns. Five million new jobs will be needed in the urban areas if the country is to avoid massive unemployment and social unrest. Kenya's government has responded to these challenges with a market-oriented economic policy, which emphasizes openness to the world economy and export-led growth. This policy necessitates a more universal and reliable telecommunications network than would be needed had Kenya attempted a predominantly inward-looking, centrally-directed economic strategy similar to those attempted by some other African countries. As in other countries that rely to a high degree on exports for both job creation and foreign exchange, economic policy in Kenya must ensure that the export sector is fully competitive in the global marketplace. As this chapter will show, the mere availability of a commodity for export (or of a tourist attraction to draw in visitors) is less and less a sufficient condition for economic success. Quality, productivity, effective marketing and distribution in global markets, superior customer service, and speedy and appropriate responses to changing market conditions are all essential. An efficient and reliable telecommunications infrastructure is essential to achieve these goals.
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Moreover, successful export economies need the participation of global corporate leaders to set the pace for quality, technology, productivity, and innovation by implementing global "best practices." Their direct investment, though useful, is not as indispensable as their broader role as innovators, pace setters, and conduits for the transfer of technology and "best practices." In Kenya, these global companies directly and indirectly support hundreds of smaller companies and tens of thousands of employees. The operating methods of such global companies require extensive use of both voice and data telecommunications, domestically as well as internationally. Experience shows that global companies will focus their management efforts and their investments where adequate telecommunications (as well as other preconditions for productive, effective operations) permit them to remain globally competitive The history of economic development from the 1970s to the 1990s, especially the spectacular success of export-led growth in certain newly industrialized countries in Asia such as South Korea and Thailand, and the equally spectacular failure of many national economies in Africa and Asia under nationalization and central planning, makes the Kenyan case of wide interest and significance for those concerned with development strategy. The economic role of the telecommunications sector in Kenya has been the subject of significant economic and business research. Based on that research and on a series of field interviews carried out in June 1991, we have drawn several conclusions: Expanding the scope and enhancing the quality of the telecommunications services offered to rural and urban businesses yields economic benefits far in excess of the costs incurred; Despite major expansion of the public network during the 1980s and early 1990s, there are still un-served or underserved user requirements of major economic significance; there are large direct and indirect benefits in foreign-exchange earnings to be derived from improving telecommunications services; these benefits are particularly valuable to a country like Kenya with an economy strongly linked to international trade. The substantial net in-payments of hard currency accruing to Kenya from

telecommunications carriers in other countries through the international settlements process could be used as collateral for the financing of major investments in telecommunications. This approach could help sustain the high rate of telecommunications sector investment that is clearly require--a rate that might otherwise be difficult to sustain because of the financial state of the Kenya Post and Telecommunications Corporation (KP&TC).

This chapter reviews the efforts that have been made in Kenya to understand and meet the telecommunications needs of economic development. It draws conclusions about the challenges that must be overcome if the telecommunications sector is to play its essential role in supporting and enabling continued economic growth--especially the continued growth of exports. It also offers some ideas regarding the future of the telecommunications sector in Kenya.

PHENOMENAL MOBILE PHONE GROWTH In 2000, some 180,000 Kenyans had access to a mobile phone. Bye the end of 2006 that figure had grown to 7.3 million people an increase of more than 4000 %. The fast-growing mobile sector is characterized by competition between two operators: Safaricom, a 60/40 percent joint venture between the government-owned Telkom Kenya and Britains Vodafone; and Celtel, a subsidiary of Africas third ranked phone company. Both companies have made considerable growth and profits since their inception but still there is enormous potential remaining in the mobile phone sector. In March 2007, global telecommunications giant Ericsson opened a regional hub in Nairobi as part of its ongoing emerging markets expansion programme. The mobile phone sector currently accounts for 5 percent of Kenyas GDP and analysis show the sector as holding great potential for further growth once a third mobile phone services operator is introduced and mobile phone taxes are lowered. MARKET SIZE OF KENYA The total number of mobile subscribers in Kenya at the end of 2009 was 19.11 million, resulting in a penetration rate of approximately 48 percent. Total mobile subscribers in the country have increased at a rapid rate of approximately 459 percent from 3.42 million at the end of 2004 to 19.11 million at the end of 2009. The corresponding increase in the penetration rate during this period has been from around 5 percent to 48 percent. The country's mobile subscriber base is expected to increase further over the next few years, resulting in a mobile subscriber base of 30.58 million and a penetration rate of 68 percent by the end of 2014.

INTERNET DEVELOPMENT Kenyas internet sector has managed to grow considerably over 10 years with what started as a handful of dial-up modems in 1995 evolving into a dynamic industry with numerous internet hosts, nearly 100 licensed internet service providers (ISPs) and roughly 2.7 million internet users in the country. There is an abundance of internet cafes in the main urban centers and wireless technologies are available throughout Nairobi. The Kenyan government has launched an e-government strategy, a programme that intends to connect the countrys rural population. Beyond downloading pension forms and embarking on other virtual interactions with Nairobi, citizens in the e-government Internet Caf can access helpful information.

KENYA EXPANDS BROADBAND NETWORK

The government is now supporting several projects aimed at boosting the countrys broadband infrastructure with the most high-profile projects being the East Africa Marine System (EAMS) and the East Africa Submarine cable System (EASSY), initiatives that will connect the countries of eastern Africa via a high bandwidth fibre optic cable system with the rest of the world. TEAMS, a multi-million dollar fibre optic cable link from Mombasa to Fujaira in the United Arab Emirates, are expected to link East Africa to the rest of the world.

HYSTORICAL EVOLUTION

Development

of

the

Public

Telecommunications

Network

Kenya's

earliest

telecommunications connections to the outside world were the submarine cables linking Zanzibar, Mombasa, and Dar-es-Salaam laid by the Eastern & South African Telegraph Company in 1888. Internally, the construction of a telegraph net work began with a 200-mile coastal line linking the port city of Mombasa with Lamu. Extension into the interior of the country began in 1896 in conjunction with the building of the railway system, forming a dual "backbone" for Kenya's communications infrastructure. The extension of the telegraph line even overtook railway construction, reaching Nairobi in 1898 and Kampala and Entebbe in Uganda in 1900. Telephone service soon followed. In 1908, the public telephone network began service in Nairobi, the capital, and in Mombasa. In Nairobi that year, eighteen telephone subscribers were connected.

The subsequent history of Kenya's network was one of gradual but sustained expansion. By 1980, there were 73,932 direct exchange lines (DELs) in use in the public telephone network; just over 84% were connected to automatic switching equipment and 75% ha d direct longdistance dialing (STD or subscriber trunk dialing) capability. There were 1,228 telex lines in use and 50 leased data transmission circuits in use. The network of 1980 represented a solid foundation for future expansion even though it had significant shortcomings: 33% of longdistance call attempts failed due to congestion, and at any given time 15% of exchange lines were not in working order. [KP&TC Annual Reports; Tyler and Jonscher, 1982.]

Business activities of telecom sector Kenya's telecom market has had great potential for growth because of its previous low penetration levels in both fixed and mobile markets. 2004 saw significant changes in the country's telecom industry, with the incumbent operator Telkom Kenya losing its monopoly in the fixed-line and internationals bandwidth sectors. Licenses were also issued to a regional carrier, third mobile operator and several new data carriers, thereby marking a significant change in the competitive landscape for telecom services across the country. The last five years has seen rapid growth due to new players entering the market, the introduction of 3G services by the telecom operators and, very recently, duty being waived on new mobile handsets and the allowance of number portability.

The official telecom regulatory body of the country is Communications Commission of Kenya (CCK). In 2009, the Government recognized these rapid changes and developments in technology and introduced the Kenya Communications (Amendment) Act 2009. They are now responsible for facilitating the development of the information and communications sector and electronic commerce. Mobile Market

Mobile services in Kenya were pioneered with the launch of an ETACS network in 1993. But due to issues such as the high cost of handsets and high charges for the service, the number of mobile subscribers at the end of 1999 was only 20,000. The number of operators providing mobile services in Kenya has now increased to four and with improving mobile infrastructure there is coverage in all major towns and highways in the country. The price of handsets has reduced due to the duty being waived by the Government and the increase in operators has intensified competition leading to price competition in the market. Safaricom still dominate the market with a market share of 79% and the number of subscribers had risen to over 19 million in 2009. The CCK is planning to introduce number portability by the end of July 2010 which will give mobile phone subscribers the option to switch between service providers without changing their phone number. This is likely to work to the benefit of the smaller operators. Market Size The total number of mobile subscribers in Kenya at the end of 2009 was 19.11 million, resulting in a penetration rate of approximately 48 percent. Total mobile subscribers in the country have increased at a rapid rate of approximately 459 percent from 3.42 million at the end of 2004 to 19.11 million at the end of 2009. The corresponding increase in the penetration rate during this period has been from around 5 percent to 48 percent. The country's mobile subscriber base is expected to increase further over the next few years, resulting in a mobile subscriber base of 30.58 million and a penetration rate of 68 percent by the end of 2014. Mobile Network Operators Kenya's mobile market has four key players - Safaricom, Bharti (was Zain), Telkom Kenya (Orange/France Telecom) and Essar Telecom Kenya (known as the brand Yu). Safaricom dominates the market holding about 79 percent share and they currently believe that they are being targeted by new competition rules introduced by regulators to safeguard against abuse of their market dominance.

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The other market players welcome the rules as an attempt to monitor market segments where there is a monopolistic situation and no form of price control. Major players in market

Beeper Communications Limited Broadcast Automation Technologies Ltd. Cellular Services(K) Ltd. Monier International Limited Telebell Limited Safaricom Ltd

Beeper Communications Limited "Beeper Communications Limited is a local company launched in Nairobi in July 1998. Operational also in Mombasa, Nakuru, Kisumu and Eldoret. Aims to offer advanced telecommunication services as an alternative to similar services currently available in the market, and to create a competitive environment in the industry by providing high quality products at prices that are accessible to the majority of customers." Broadcast Automation Technologies Ltd. "Broadcast Automation Technologies Limited(BATL) specializes in a wide range of products & services for the broadcast & I.T. industries." Cellular Services(K) Ltd. Cellular Services (K) Ltd. is a private telecommunication company specializing in mobile phone Services. The company started its operations in September 1999. The main objective was to provide cellular phones and related services, educate professionals and the general public on the importance and needs of using cellular phones in day to day undertaking and as an alternative communication means."

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Monier International Limited "Monier International Limited was established in 1991 to satisfy the growing need for high quality advertising in the fast changing African market. Main head office is situated in Nairobi, Kenya with branch offices in Dar es Salaam-Tanzania and Asmara-Eritrea. Advanced plans are under way to open more branches in Addis Ababa-Ethiopia and the rest of Africa where our products are sold. Monier International also works in partnership with L.A.D.M. Investment situated in Israel and is thus able to keep abreast of new technological innovations in the field of outdoor advertisement. Monier International was the first company to introduce the full colour photographic billboard posters to the East Africa Market." Telebell Limited "Telebell Ltd has been the market leader in telecommunications for the last 5 years. As a registered vendor with KPTC Telebell Limited holds the agency for B.T. from the U.K. for telecom equipment. In a rapidly increasing market Telebell offers the world renowned Panasonic telecommunication products such as fax machines, telephones, answering machines, executive phones, switch boards, cordless phones, typewriters and ordinary phones. "

SERVICE QUALITY The continuing concerns expressed by users focused mainly on the availability of service and the degree of service reliability and congestion in rural areas; specific local problems in the Nairobi industrial area (where a large amount of industrial activity takes place) and the Jomo Kenyatta Airport area outside Nairobi; delays and unpredictability in the installation of new exchange lines and leased lines; and delays in repairing faults. In the Nairobi industrial area, network congestion was still severe at the time of our program of interview fieldwork in Kenya in 1991. This has continued to be a concern for some companies located in this area. the telecommunications picture in Kenya is one of significant but uneven improvement in service quality, with the most extreme problems of service interruption being overcome in most locations (with important exceptions) and congestion, slow installation, and repair as continuing concerns. It is indicative of the significance of these problems that telecommunications difficulties figured prominently in the controversy in the early 1990s over an (unsuccessful) proposal to relocate the world headquarters of the United Nations Environment Program (UNEP) from Nairobi to Geneva.
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INDIAN TELECOM OVERVIEW The Indian Telecommunications network is the third largest in the world and the second largest among the emerging economies of Asia. Today, it is the fastest growing market in the world. The telecommunication sector continued to register significant success during the year and has emerged as one of the key sectors responsible for Indias resurgent Indias economic growth. GROWTH & DEVELOPMENT This rapid growth has been possible due to various proactive and positive decisions of the Government and contribution of both by the public and the private sector. The rapid strides in the telecom sector have been facilitated by liberal policies of the Government that provide easy market access for telecom equipment and a fair regulatory framework for offering telecom services to the Indian consumers at affordable prices. GSM SECTOR In terms of the Global System for Mobile Communication (GSM) subscriber base this now places India third after China and Russia. China had 401.7 million GSM subscribers.

CDMA SERVICES CDMA technology was introduced in India as a limited mobility solution. The introduction of CDMA services has created competition, lowered tariffs and offered many citizens access to communication services for the first time.

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MARKET PLAYERS IN INDUSTRY There are three types of players in telecom services: State owned companies (BSNL and MTNL) Private Indian owned companies (Reliance telecomm, Tata Teleservices) Foreign invested companies (Hutchison-Essar, Bharti Tele-Ventures, Escotel, Idea Cellular, BPL Mobile, and Spice Communications) Tata Teleservices is a part of the $12 billion Tata Group, which has 93 companies, over 200,000 employees and more than 2.3 million shareholders. Tata Teleservices bouquet of telephony services includes Mobile services, Wireless Desktop Phones, Public Booth Telephony and Wire line services. Other services include value added services like voice portal, roaming, post-paid Internet services, 3-way conferencing, group calling, Wi-Fi Internet, USB Modem, data cards, calling card services and enterprise services. Vodafone Essar in India is a subsidiary of Vodafone Group Plc and commenced operations in 1994 when its predecessor Hutchison Telecom acquired the cellular license for Mumbai. Vodafone Essar now has operations in 16 circles covering 86% of India's mobile customer base, with over 45.78 million customers. Vodafone Essar, under the Hutch brand, has been named the 'Most Respected Telecom Company', the 'Best Mobile Service in the country' and the 'Most Creative and Most Effective Advertiser of the Year'. Idea Cellular is part of the Aditya Birla Group, which is India's first truly multinational corporation. Aditya Birla Nuvo Ltd. holds 35.7 per cent, Birla TMT Holdings Ltd. 44.9 per cent, Grasim 7.5 per cent, and Hindalco 10.1 per cent in Idea. Reliance Telecom's cellular services are available in 340 towns within its eight-circle footprint. Reliance Infocomm also offered for the first time in India, mobile data services through its
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RWorld mobile portal. This portal leverages the data capability of the CDMA 1X network. Reliance Infocomm offers a complete range of telecom services covering mobile and fixed line telephony including broadband, national and international long distance services, data services and a wide range of value added services and applications aimed at enhancing productivity of enterprises and individuals.

Bharat Sanchar Nigam Ltd. is World's 7th largest Telecommunications Company providing comprehensive range of telecom services in India: Wire line, CDMA mobile, GSM Mobile, Internet, Broadband, Carrier service, MPLS-VPN, VSAT, VoIP services, IN Services etc. Within a span of five years it has become one of the largest public sector units in India.

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COMPARISON OF TELECOM SECTOR OF KENYA WITH INDIA

TELEPHONES - MOBILE CELLULAR This entry gives the total number of mobile cellular telephone subscribers.

1998 India Kenya 1,900,000 6,000 2008 India Kenya 296,080,000 11,440,000

2000 2,930,000 540,000 2009 362,300,000 24,969,000

2003 26,154,400 1,590,800 2010 752,000,000 45,965,000

2006 69,193,000 6,500,000

800,000,000 700,000,000 600,000,000 500,000,000 400,000,000 India 300,000,000 200,000,000 100,000,000 0 1998 2000 2003 2006 2008 2009 2010

Kenya

16

TELEPHONES - MAIN LINES IN USE This entry gives the total number of main telephone lines in use.

1999 India Kenya 18,950,000 290,000 2008 India Kenya 38,760,000 264,800

2000 27,700,000 310,000 2009 37,750,000 460,100

2003 48,917,000 328,400 2010 35,090,000 840,340

2005 49,750,000 281,800

60,000,000

50,000,000

40,000,000

30,000,000

India Kenya

20,000,000

10,000,000

0 1999 2000 2003 2005 2008 2009 2010

17

TELEPHONES - MAIN LINES IN USE PER CAPITA This entry gives the estimated number of fixed telephone lines per 100 people.

2000 India Kenya 2.73 1.01 2008 India Kenya 3.38 0.72

2003 4.66 1.04 2009 3.24 1.18

2005 4.61 0.83 2010 2.99 2.30

5 4.5 4 3.5 3 2.5 India Kenya

2
1.5 1 0.5 0 2000 2003 2005 2008 2009 2010

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TELEPHONES - MOBILE CELLULAR PER CAPITA This entry gives the estimated number of mobile phone lines per 100 people. It is also known as the mobile phone penetration rate.

2001 India Kenya 0.29 1.76 2006 India Kenya 25.79 18.73

2003 2.49 5.03 2007 31.07 30.99

2005 6.32 13.63 2009 64.1 64.02

70

60

50

40 India 30 Kenya

20

10

0 2001 2003 2005 2006 2007 2009

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INTERNET HOSTS This entry lists the number of Internet hosts available within a country. An Internet host is a computer connected directly to the Internet; normally an Internet Service Provider's (ISP) computer is a host. Internet users may use either a hard-wired terminal, at an institution with a mainframe computer connected directly to the Internet, or may connect remotely by way of a modem via telephone line, cable, or satellite to the Internet Service Provider's host computer. The number of hosts is one indicator of the extent of Internet connectivity.

2003

2005

2006

2008

2010

India

86,871

787,543

1,543,000

2,707,000

6,738,000

Kenya

8,325

11,645

13,274

27,376

69,914

8,000,000

7,000,000

6,000,000

5,000,000 India Kenya 3,000,000

4,000,000

2,000,000

1,000,000

0 2003 2005 2006 2008 2010

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INTERNET USERS This entry gives the number of users within a country that access the Internet. Statistics vary from country to country and may include users who access the Internet at least several times a week to those who access it only once within a period of several months. 2000 India Kenya 4,500,000 45,000 2007 India Kenya 80,000,000 3,000,000 2002 7,000,000 400,000 2008 81,000,000 3,360,000 2003 18,481,000 530000 2005 60,000,000 1,055,000

2009 61,338,000 3,996,000

90,000,000 80,000,000 70,000,000 60,000,000 50,000,000 India 40,000,000 30,000,000 20,000,000 10,000,000 0 2000 2002 2003 2005 2007 2008 2009 Kenya

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AFFECTED FACTORS OF KENYA TELECOM In order to respond to today's dynamic business nature many firms have implemented enterprise resource planning (ERP) systems. ERP can be defined as a large - scale information system that integrates all business functions into one unified function. Companies are realizing that they have to implement ERP in order to remain competitive. This research project sought to identify and understand the factors affecting such implementation in Telecommunication firms in Kenya, focusing on a case of Telkom Kenya.

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Present Position and Trend of Business

Accordingly, the Department of Telecom has been formulating developmental policies for the accelerated growth of the telecommunication services. The Department is also responsible for grant of licenses for various telecom services like Unified Access Service Internet and VSAT service. The Department is also responsible for frequency management in the field of radio communication in close coordination with the international bodies. It also enforces wireless regulatory measures by monitoring wireless transmission of all users in the country. The present telephone density in India is about 0.8 per hundred persons as against the world average of 10 per hundred persons. It is also lower than that of many developing countries of Asia like China (1.7), Pakistan (2), Malaysia (13) etc. There are about 8 million lines with a waiting list of about 2.5 million. Nearly 1.4 lakh villages, out of a total of 5, 76,490 villages in the country, are covered by telephone services. There are more than 1 lakh public call offices in the urban areas.

The Sixth Session of the Kenya-India Joint Trade Committee (JTC) Meeting was held in Nairobi on 12th and 13th October 2010, in accordance with Article X of the Trade Agreement signed between the Republic of Kenya and the Republic of India on 24thFebruary 1981 in New Delhi. Article 10.1 of the Bilateral Trade Agreement provides for continuous review of the implementation of the provisions of the Bilateral Trade Agreement, examination of measures for the solutions of problems which arise or may arise in the implementation of
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this Agreement or in the course of development of trade between the two countries and consideration of proposals made by either Contracting Party within the frame-work of this Agreement aimed at further expansion and diversification of trade between the two countries. The volume of bilateral trade has shown remarkable growth since 2005-06. Bilateral Trade has grown from US $ 625 million in the year 2005-06 to US $ 1,530 million in 2009-10, registering a growth of 145 % in the last 4 years. Indias exports to Kenya have increased from US $ 576 million in 2005 - 2006 to US $ 1,452 million in 2009- 2010. Similarly, Indias imports from Kenya also rose from US $ 48 million in 2005 -06 to US $ 79 million in 20092010. There is tremendous potential for further diversifying and expanding the bilateral trade between both countries. India requested Kenya for early implementation of the pan Africa e-network. The ICT Board signed the Country Agreement with TCIL on 21st July 2010. The ICT Board was requested to identify site locations so that the pre installation and feasibility studies could be carried out by TCIL. Indian side also extended cooperation in training of Kenyan personnel in the Advanced Level of Telecom Training Centre (ALTTC) Ghaziabad and the Centre of Excellence in Telecom Technology and Management Mumbai. Cooperation was also extended in the fields of setting up e governance infrastructure, ICT services related to telecom operation support, and information call centers in agriculture sector. Kenya side said that the site will have been identified by end of October 2010. The national coordinator has already been identified and the contact details will be conveyed. All the equipment has been received and cleared by Kenya ICT Board. The equipment will be dispatched to the identified sites for installation. ICT Board will cooperate with TCIL in establishing a call center for the agricultural sector to revolutionalize flow of information benefitting farmers immensely and also creating a database for other organizations. Kenya had initiated an MOU for cooperation in some of the areas discussed during the 5th JTC. The Indian side will respond so as to fast track implementation especially in areas of capacity building.

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POLICIES AND NORMS

POLICIES AND NORMS OF KENYA FOR TELECOM SECTOR

The Communications Commission of Kenya (CCK) is responsible for licensing

telecommunications operators. The Ministers responsibilities are limited to setting broad policy objectives, which the CCK must take into consideration when awarding new licenses. In issuing licenses, the paramount consideration is the provision of telecommunication services to satisfy public demand. A board directs the affairs of CCK. The board comprises:

A chairman appointed by the President A Director General appointed by the minister responsible for telecommunications Four permanent secretaries representing telecommunications, finance, internal security, and broadcasting

At least five other persons not being public officers, appointed by the minister by virtue of their expertise on matters of interest to CCK

There is unlimited discretion on the appointment of the members, whose terms of appointment are set out in an individual letter of appointment. The government will continue to have a controlling ownership of TKL and it is the duty of the Ministry of Finance representative in the CCK to safe-guard that interest. Government ownership of the dominant player in the sector may be viewed to be in conflict with independence in decision-making in actions against the commercial interest of TKL. Additionally, if the past is a guide, it is likely that the representatives for the Ministry of Telecommunications and Finance will be board members of TKL. Viewed against the WTO Reference Paper, the regulator may be perceived to be closely linked with the TKL and therefore fail to conform to the principles of the Reference Paper. Already TKL and the CCK share one board member, which in essence compromises the independence of the regulator. The CCK has already weathered its first storm in the pre-qualification of six bidders out of 26 applicants for the second mobile operator license, in which several parties lodged complaints for disqualification of certain applicants. However, in awarding the second license, the CCK exhibited what has been widely acclaimed as transparency by choosing a technically sound tender over another financially attractive tender. Vivendi Telecom bid US$55 million for rollout of 582 700 lines in five years
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against Orascoms bid of US$93 million for an undisclosed number of lines. Orascom was disqualified on the grounds that its consortium details kept changing, including the withdrawal of GTE (USA) from the partnership. The Status Of Telecom In Kenya Status in 1994 0.8% teledensity far below world average of 10% and other Total phones: 8 mn with a waiting list of 2.5 mn. Below 25% villages (1.7 lakhs) covered.

National Telecom Policy 1994 Announced. Telecom a national priority for increased economic development. Plan targets revised to have telephone on demand and all villages covered. All services available internationally to be available in India by 1996. Value-added services opened in 1992 (cellular mobile, radio paging, email, etc.) Resource gap of Rs 23,000 cr to meet the revised targets necessitated private sector participation. Tendering process for selection of private players for Basic and Cellular services.

The First Phase Of Reforms In Telecom In India Leading To Privatization Licenses awarded (in 1995-97) after tendering and bidding process: 8 GSM licenses in 4 metros (no bidding beauty parade). 34 GSM licenses in 18 state circles 6 Basic Service Licenses in 6 state circles

Results not satisfactory due to: Actual revenue realizations far short of projections leading to operators being unable to arrange finance for their projects and complete rollouts. Government appreciates the concern of the operators and allows for mid-course corrections. Challenges And Growth Of Indian Telecom Sector India has emerged as one of the youngest and fastest growing economies in the world today. One of the sectors that has shown the signs of profitability and contributed significantly to the country's economy is the telecom industry. In fact, the Indian telecom market has gained recognition as one of the most lucrative markets globally.
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The vast rural market holds a huge potential to drive the future growth of the telecom companies. Further, the government's initiatives for increasing the telecom connectivity in rural areas are also likely to aid the telecom service providers to extend their services in the unconnected rural areas. The Indian Telecommunications network with 621 million connections (as on March 2010) is the third largest in the world. The sector is growing at a speed of 45% during the recent years

This rapid growth is possible due to various proactive and positive decisions of the Government and contribution of both by the public and the private sectors. The rapid strides in the telecom sector have been facilitated by liberal policies of the Government that provides easy market access for telecom equipment and a fair regulatory framework for offering telecom services to the Indian consumers at affordable prices. Presently, all the telecom services have been opened for private participation. The paper examines the changing landscape of telecom sector in the terms of challenges and opportunities. The Indian mobile subscriber base is likely to sustain the rapid growth recorded in the past few years. Presence of skilled labor pool, improving telecom infrastructure, favorable
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demographics, rising disposable incomes of consumers, declining tariffs, increasing demand, growing attraction for mobiles with new features and greater availability of handsets at lower prices, are expected to continue driving the growth of the telecom sector, going forward. The growth of India as a knowledge based economy will not be possible without the growth and expansion of the Indian telecommunications and IT sectors. This symbiotic relationship is not lost on the government which has attempted to back the telecommunications sector by fostering an encouraging regulatory scenario. This has not only helped the

telecommunications sector to evolve in a dynamic manner but has enabled it to attract foreign investments.

Telecom spectrum is a scarce resource and with so many scams happening right under the governments nose, it is no surprise that the situation looks quite grim. But despite all the hiccups, the future is fresh with promise as each day; the mobile is finding more acceptances and becoming an inevitable part of our lives. Perhaps, that is a single shimmer of hope that is keeping the sector going. The area which needs immediate attention is the need for flexibility in the regulatory mechanism. The telecom legislation at present seems to be archaic laws and the need of the industry right now is a mechanism that can continuously adapt itself to the changing needs of the industry. There is no doubt at all that the coming years are going to be exciting years for the Indian telecom sector.

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GOVERNMENT POLICY ON ICT SECTOR The Government of Kenya has embarked on a series of initiatives to revitalize and transform the economy into a modern market-oriented one. The aim is to improve the economic well being of Kenyans by establishing Kenya, in the medium term, as the centre of industrial and financial activities in the region. The sector policies aim to define the framework within which telecommunications and postal services will be provided. The overall Government objective for the sector is to optimize its contribution to the development of the Kenyan economy as a whole by ensuring the availability of efficient, reliable and affordable communication services throughout the country. The primary motivation for growth in ICT has come from the private sector, with the role of governments being that of a facilitator for creating an enabling environment. The challenges to incorporate ICT in various aspects of economic development centers on five major areas are: Support to small and medium business Education attracting high tech industry Access to technology infrastructure Business friendly government

Industry structure One of the immediate goals of the telecommunications sector reform was to increase telecommunication supply. The immediate result of the reform has been witnessed in high growth in all areas that were open for competition. Low growth was noted in the areas without competition notably in the provision of fixed line services. Competition no doubt released resources from the private sector to serve the demand that could not be served under a monopoly environment. The Communication Commission of Kenya (CCK) reviewed and segmented the telecommunication sector market into various service streams that are licensed separately as: Facility based public fixed telecommunication service Land mobile radio communication service (type 2 carrier) Fixed and mobile satellite services Facility based data communications networks and services Internet facilities and services and
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Value added services (VAS)

RECENT POLICY CHANGES IN INDIA AND THEIR IMPACT The government had initiated policy changes largely in the following areas: Restructuring the sector Increased investments Technology development and transfer Service provision

The objective was to provide accelerated growth in infrastructure and services, improve customer service, provide autonomy and flexibility within the sector to expedite growth, raise finances from the public, and provide an effective regulatory and policy environment. In the following we attempt to review the policy changes, assess the impact, and suggest directions for improvement. Business Opportunities in future There is currently no significant export of ICT products and services. However there are several start-ups who have successfully tapped into the outsourcing industry, primarily call centers, business process and data entry, and this area seems to have great potential for growth in the medium and long term. Mecer, a South African computer manufacturer, has set up its regional assembly plant of desktop computers in Kenya. This plant exports 50 per cent of its output to other countries in the greater East African region. Finally a lot of imported ICT equipment, especially mobile phone handsets, is re-exported to the neighboring countries however with no value addition taking place in Kenya. Political risk There are no perceived political risks in the ICT industry in Kenya. The current government and any likely future governments are bound to value to potential ICT brings to the private and public sectors. Besides developing the 2006 Kenya ICT Strategy and pushing for the implementation of the ICT act, the government has committed itself to digitize its operations by 2008, e.g. Making forms and other paperwork available online, and thus accessible at any web caf or office with Internet connection throughout the country.

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BUSINESS OPPORTUNITIES

Business Opportunities in future

As a regional hub and a financial capital of the East and Central Africa region, Kenyas competitive advantage as an ICT investment destination is supported by various investor friendly factors that include: Regulatory framework The establishment of Communications Commission of Kenya (CCK) as the regulatory body provides an investor with a one-stop body for registration and facilitation thus reducing bureaucracy. The regulation of the sector and granting of licenses remain the responsibility of CCK. Availability of a well-trained labor force Kenya has a well-trained English speaking labor force with skilled personnel trained in ICT and related fields. ICT and computer learning is currently offered at both secondary school level and in universities and tertiary institutions in the country. Wages in Kenya are generally reasonable and this extends to the ICT sector. Kenyas relation with the global information infrastructure Kenya is an active member of the International Telecommunications Union, ITU. Kenya is also a participant and a signatory to a number of international conventions and standards relating to ICT. Diversified experience Kenyans are involved in virtually all areas of ICT. Whether in telecommunications, hardware components, software, or Internet service provision, Kenya has a well-established group of companies involved in all of these areas. Access to the regional market Kenyas membership in regional trading bodies such as COMESA, African Union and the East African community provides potential investors with a large potential market for their products and services.

The Kenya government can guarantee investor friendly arrangements such as: The Export Processing Zones (EPZ) program which offers attractive incentives to exportoriented investors Kenya Investment Authority to promote all other investment in Kenya including in Manufacturing under Bond (MUB) program
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The Tax Remission for Export Office (TREO), a program for intermittent imports for export production

Generous investment and capital allowances Double taxation, bilateral investment and trade agreements The liberalization policy allowing for private sector participation in the ICT sector Reduced taxes on computer hardware and software (zero rating of import duties on PCs) Removal of licensing requirements on information and broadcasting services

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CONCLUSIONS India has begun a process of telecom reform without any coherent long term plan. For the benefits to be available to the economy a number of actions would have to be taken, viz., separation of policy and operation, corporatization of at least some divisions of telecom service, and implementation of a long term training policy and monitoring systems to ensure fair access to the network. Ad-hoc nature of the reform process would lead to minimal benefits and at times may be dysfunctional. The speed of implementation of reforms needs to be accelerated. Implementation of many of these suggested measures may require strong political will and a concerted effort. This paper highlights the role of political will and employees concerns in implementing reforms and the need for top management in addressing them. A well laid out plan for reform is likely to bring greater success and remove uncertainty from investors and employees and bring in support for the reform process.

Indian telecom industry continued to register significant growth in 2008-09. Indian Telecom network with about 414 million connections in February 2009 is the third Largest in the world, while it is credited with the second largest wireless network in the World (see below section on Mobile Telephony for details). At the current pace, the target of 500 million connections by 2010 is well within reach. The Government of India has reiterated its commitment to reach out to remote and uncovered areas and to augment broadband facilities in rural areas. The total number of telephone increased from 76.53 million by end-March 2004 to 413.85 million by end-February 2009. About 113.36 million telephones, at the rate of more than 14 million subscribers every month were added during 11 months of 2008 09. The total teledensity increased from 12.7% in March 2008 to 35.65 per cent in February 2009. While rural tele-density reached 13.81 % in January 2009, the urban tele-density shot up to 83.66%.

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