Friday, 19 August 2011

Impressions of Kenya

I’m writing this post in the departure lounge at Nairobi airport, having spent most of this week in the city meeting various TMT companies. It’s been an eye opening few days, so I thought it’d be worth sharing a few experiences.

The challenge that sub-Saharan Africa faces with infrastructure is apparent the moment you step out of Nairobi’s slightly ramshackle airport and into one of the ubiquitous vans, which almost instantaneously becomes another crawling, hooting part of Nairobi’s quite astounding “traffic”. Traffic is a word that comes up in pretty much every conversation. Kenya has only one major road, which links it to Uganda to the east and Tanzania in the south; teeming with well used trucks, tankers and vans it is as frequently gridlocked as the surface is pot-holed.

“It breaks my Range Rover every time I drive on it” Bob Collymore, CEO of Safaricom told me, before going on to highlight the similar issues the country has with power supply and public transport. The almost total lack of the latter is a tragedy caused by neglect under the previous dictatorship – we drove past the giant and crumpling train yards of Nairobi’s once buzzing central train station, now an elephant’s graveyard of mothballed rolling stock rusting on overgrown grass. There’s no public bus service and inter-city travel is served by the horde of vans that seemed to be frequently involved in minor traffic infractions. Walking seemed to be the primary means of transport for many people, dicing with death next to the chaos on the road. Fixing these basic infrastructure challenges will be a colossal challenge for a country that despite its progress is still cripplingly poor.

There are, however, many signs of progress. The slow crawl along the highway into the city centre passes dozens of new glass-fronted buildings representing the headquarters and distribution hubs of major international corporations. Many refer to Kenya as “Silicon Savannah” and there is a degree of truth to the hyperbole.

In Safaricom (35% owned by Vodafone), they have one of the most innovative telecoms companies in the world. Safaricom’s M-Pesa – used by more than 80% of Kenyans – is the world’s most ubiquitous mobile payment system, if not its most technologically advanced, as Bob Collymore freely admitted. The genius of M-Pesa is in its simplicity and reliability and in Safaricom’s trusted brand status, characteristics that have enabled it to replace cash payment in many industries to greatly increase social wellbeing and industrial flexibility.

In addition to slightly fanciful e-health and more realistic e–government initiatives, the company has a good quality HSDPA network and is deploying some of Africa’s first FTTH to compete directly with Telekom Kenya’s half-a-million PoP fixed access line estate. With 76% market share of Kenya’s 25Mn mobile SIMs it is a surprisingly innovative company and Kenya’s largest. Its competitors are not to be taken lightly either, consisting of India’s Airtel, whose Africa headquarters are in Nairobi, and late entrants Essar and Orange. My estimate for the consumer telecoms market puts it in the $1-1.2Bn range, with another c.$150Mn coming from enterprise services.

Service-wise, 3G coverage in the city and its outskirts was excellent and SMS messages were delivered internationally in short order. International voice was much worse – I could receive calls, but not make them, which was very frustrating. Data connectivity was poor too. I didn’t try 3G because I’d imagine it would be very expensive; Wi-Fi was of good signal strength but struggled to provide high speed.

Even though Africa is now well connected by subsea cables, the paucity of onshore backhaul is apparent in the age it takes to connect to an Exchange server in London. Most businesses from banks to large office blocks had VSAT dishes on their roofs and high towers with microwave dishes were a common sight.

In a brief (and not entirely terrifying) walk in the city I managed to get a sense of some of the device prices. Basic feature phones – mainly by Nokia – retail for about $20. Dual-SIM devices were heavily advertised. More interestingly, a Hauwei Ideos smartphone can be had for 7,999 KES – about $90. I couldn’t play with one, but the Ideos resembles the old O2 XDA – a lozenge shaped fullscreen device with a plastic case. Still, I thought it impressive for the price. Since the market is almost entirely pre-paid, devices at this price point will be key in driving mobile data take-up.

I saw several very large billboards for Nokia E-series devices, but no real evidence that they were big sellers. The Executives I met had high-end Android phones and 3G/ 3GS iPhones. iPads were ubiquitous in that community. Intriguingly, I also saw an advert for a 72” LG LED TV – I don’t think I’ve seen one in any other market I’ve visited this year. This hints at the emergence in Kenya of an oft-seen trend in developing markets – a flat screen TV is often the second technology purchase after a mobile phone. Chatting to local people seemed to confirm this.

To take advantage of the opening of mass market TV consumption, conversion from analogue broadcast to digital is likely in the coming years. DVB will compete with cable, principally supplied by Naspers subsidiary Multichoice and several DTH satellite providers; it’s worth noting that SES Astra are launching 3 new spot beam satellites covering Africa in 2011 and 2012, thereby dramatically increasing transponder capacity.

I haven’t really looked for data on the media market, but my impression was that most of the channels available in the hotel and the couple of office TVs I tried were South African and sports was relatively heavily represented. EPL in particular seems popular, given the number of replica shirts on sale and the coverage in the local newspapers. The local game was represented by only a couple of sidebars, despite the presence of a giant 200,000 seat stadium in Nairobi.

On the subject of newspapers, I picked up a selection, which were of universally poor editorial quality and contained a large number of adverts relative to the UK or USA. I’d liken them more to a local paper in the UK, than to a true national paper. Radio was heavily music-based (the local taxi drivers seemed to particularly enjoy cheesy 80’s and 90’s pop) with the occasional interlude from the DJ in a Radio 1 c. 1996 manner. I didn’t catch any adverts, despite channel hopping for half an hour.

To close with, I met a gentleman from an interesting business called Kencall, which provides outsourced call centre services to international businesses and increasingly to local SMEs. Given the reasonably high level of technology literacy of the population and the fluent local use of English, this type of industry could be a great accelerator of the Silicon Savannah. As with India, answering calls can quickly turn into coding software and launching technologies...

With luck (and a signed contract :)) I’ll be visiting a number of other African countries this year, so I hope to be able to add similar first hand context to the strategy work we’re doing for inbound investors in the Sub-Saharan region.

Tuesday, 9 August 2011

Unrest 140

It would be an understatement to say that we had an interesting night in London: buildings burnt out, 600 arrests (and counting), probably to worst period of unrest in the UK since the 1980s. Without delving into the social context for this upheaval, what fascinated me last night was the way in which the power of the same social media that enabled the Arab Spring was demonstrated on the streets of a major European capital.

Simple tools like BlackBerry Messenger and Twitter allowed an unconnected mass of hooligans to achieve an unprecedented form of self-organised co-ordination and thereby elude the (valiant) efforts of one of the world's best trained police forces. Whenever the police arrived, the mob simply moved on to an undefended area - classic guerilla tactics, but without the classic guerilla command structure. It is not hard to see why Middle Eastern police forces and particularly armies were unable to prevent small civil disturbances spiraling out of control.

There were disturbing parallels between this situation and the scenario described in Adam Roberts' New Model Army - a rigid, command and control based force finds it very difficult to engage one that is entirely fluid. Now, in last night's case one side was totally untrained and therefore unable to resist effectively when cornered, but imagine the effect a small number of trained personnel could have had. There would have been carnage.

It's no wonder that the US Government and military have been pondering the question of how to weaponise social networks in order to achieve regime changes that historically would have required guns and armour. Let's just hope that such rabble rousing techniques do not become tools of terrorists, or last night's events could be a sign of things to come.

Thursday, 4 August 2011

July 2011 telecom investments in Africa

Over the last year I've been engaged on a number of projects in African technology and telecoms. As a result, I've started to compile a database of intra- and inter-continent investment into the networks that will enable the next phase of African growth.

The map shows the location and size of the investments announced in July. As a disclaimer, in some cases (for example, network investment) I have estimated the scale of the investment based on my experiences operating in the territory and in the telecoms industry.

The headline for July is that $790Mn of telecoms investments were announced in the Continent, with mobile ($499Mn) and ISP ($262Mn) the largest vertical markets for investment. Airtel's commitment of $400Mn for upgrades to its cell network in Nigeria was the largest single announcement, demonstrating the company's focus on enhancing the coverage and share of the Zain assets it acquired last year into Africa's largest mobile market.

In home streaming

Neilsen reported yesterday that in home streamers of content in the US under-index on total TV consumption. An interesting comparative data point for the UK comes from the BBC, which has been reporting steadily increasing use of the iPlayer for streaming live TV. In May, 115Mn on-demand streams were delivered by iPlayer, versus 17Mn live streams.

The latter has increased 71% YoY, versus 16% for on-demand. If this trend is mirrored across the market, then perhaps the future is not as bright as anticipated for TV, viewership of which has been increasing steadily and currently stands at about 3.8hrs per person per day.