Emerging Countries and Mobile Phones: Kenya case study
Thomas Menguy | April 16, 2007I get good comments from June on this post about Ultra Low Cost phones, about issues related to text entry for her native Kenyan language (Swahili I assume) : she gave me some great material about the impact and development of the mobile phone uses in Kenya. To write this article I’ve then wandering about the net to get some information about the Kenyan way of cellphoning … surprising.
I’ll try to sum up it here…cause I was pretty new to Kenya before this internet-can-only-do-that encounter. Kenya was for me the land of the 2 meters high Massais, of the lions…and the few words of Swahili I know are akouna matata, taught by my uncle, a former flying doctor with mama Daktari (ok he taught me also akouna matiti, I let native speakers translate, and no it is not from the Lion King). In a less positive aspect he told me also about AIDS in some part of Nairobi were 70% of the population is infected…
So this was my background before meeting June on my blog, about a much more futile topic: how to properly send text messages in Swahili
First some economical facts about Kenya found here :
Kenya | Sub-Saharan Africa | world | ||
Total population (millions) |
mid-2006 | 34.7 | 767 | 6,555 |
Percent urban (%) | 2006 | 36 | 34 | 48 |
Percent of total population ages 10-24 (%) | 2006 | 35 | 33 | 27 |
Percent of total population under 15 (%) | mid-2006 | 43 | 44 | 29 |
Gross national income (US$ per capita) | 2005 | 530 | 745 | 6,988 |
Population below poverty line (%) | 1990-2003 | 52.0 | nd | nd |
Population below US$1/day (%) | 1990-2004 | 22.8 | nd | nd |
Average yearly income seems to be under $400 US
Plus there is a real corruption issue: check it here
So ok we have an economical context: we are in a really poor country, not a lot of education, state of law is not perfect, but at least b it is a democracy.
So let move to a little telecom context :
- An historical, state owned fixed land line operator (Telkom Kenya) : no competition, low performer:
In 1990, only 48.1% of call attempts on the long-distance network were being completed successfully. Domestic calls were slightly better at 53.7%. (according to the study June sent to me)
But now, even if it has no license for GSM bands, Telkom is willing to offer some “local loop” offers, using CDMA (? CDMA2000?) technologies.
- 2 different wireless (GSM) operators:
- Safaricom : Formed in 1997 as a fully owned subsidiary of Telkom Kenya. In May 2000 Vodafone acquired 40% stake and management responsibility. It had reached 5.9 million at the moment (March 12, 2007) was 3.5 million customers by March 2006
- Celtel : Celtel bought privately owned Kenyan KenCell in 2004. Previously called MSI, mobile phone operations began in 1998, and since then networks have been built in 15 African countries, under licenses that cover more than a third of the population of Africa. In April 2005, Kuwaiti mobile operator MTC acquired Celtel: MTC reaches now 27 millions subscribers (19.3 millions for celtel), for Kenya: 1.9 millions by end 2006, 1.8 millions by end 2005.
Safarico’s average revenue per user (ARPU) is 2 X Celtel’s and has not dropped in three years
In the June report we have a 14$ per month cellphone bill in 2004, plus this:
Market watchers estimate monthly ARPU in Kenya lies in the Sh500 to Sh2,100 ($7-20) range.
So for a 400$to 530$ a year income it means the cell phone bill is ranged from 15% to 60% of the standard Kenyan income…what a blast! This has to be moderated cause wealth is really far from being uniform in this country (see the poverty number), but with around 9 millions cellphone subscribers (so around 25% of the population), those numbers are not completely irrelevant.
Plus a big chunk of these subscribers are on pre-paid plans… big bonus for the carriers…
So those number are really intringing from an US/EU point of view: no one here is willing to pay 15% to 60% of its income for a mobile phone…so I went through many interesting articles to understand it:
After all the lack of infrastructures (road, fixed phones landlines, etc) or state of law can be, for some part, overcame by the use of mobile phones!:
Source: International Telecommunication Union
The chart above simply shows that communication is something vital, and if you don’t get it with a “traditional” way, you will get it at the end, at any cost…and if your country has a poor execution for this” traditional” approach, use proved next generation technology cause really, when you have a solid wireless network, who needs fixed lines? (except for internet access, but wait for low cost 3G or 4G and you can ditch the copper lines forever…)
Here are some interesting day to day case studies showing how important is the cellphone impact on the Kenyan society: (source : this Reuters article , this BBC one part 1, part 2 , this textually.org one
- Amina Harun, a 45-year-old farmer, used to traipse around for hours looking for a working pay phone on which to call the markets and find the best prices for her fruit. Then cell phones changed her life. ”We can easily link up with customers, brokers and the market,” she says, sitting between two piles of watermelons at Wakulima Market in Kenya’s capital.
- Omar Abdulla Saidi, phoning in from his sailboat on the Zanzibar coast looking for the port that will give him the biggest profit on his freshly caught red snapper, tuna and shellfish.
- “We are developing unique ways to use the phone, which has not been done anywhere else,” says South African Michael Joseph, chief executive officer of Safaricom, one of two service providers in Kenya.For example, wildlife researchers in Kenya and South Africa have put no-frills cellphones in weatherproof cases on a collar that goes around an elephant’s neck. The phone sends a message every hour, revealing the animal’s whereabouts, explains USA Today.It cuts the cost of tracking wildlife by up to 60%, said Professor Wouter van Hoven of the University of Pretoria’s Center for Wildlife Management.
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In Kibera, Africa’s biggest slum, with about 800,000 people living in streets that are effectively composed of sewage and old shoes. When the residents of Kibera came together last year, it was the first time people from shanty-towns around Nairobi had properly linked up beyond their local issues. They came together to fight evictions. Here is the story of what usually happens. A rich guy in a white cap comes along and buys the land, then he goes to the local chief and “gives him something for his breakfast”. A brown envelope is slipped into the pocket of the chief, and now he calls for his askari – a big security guard with a stick. “They come at night with bulldozers. They take off your door, your window frame or your roof and throw your things into the streets. That’s eviction”. So what the Nairobi People’s Settlement Network did was use mobiles and the internet to get organized against evictions. They used what we would call flashmobbing to call people from across the many different and rival settlements together where big evictions were planned, and threatened to sit down in front of the bulldozers. It has not been completely effective, since the bulldozers simply wait a few days – but it is starting to change the dynamics of grassroots politics (BBC NEWS | Technology | From Matatu to the Masai: Part Two)
- A surprising new job, created by this cellphone boom: Wireless-Mobile Kiosk:
One indicator of the telecommunications industry’s deep penetration into the everyday economy is the ubiquitous wireless-phone kiosk, where customers can rent mobile phones by the minute.
Cheap to set up and lucrative to operate, kiosks often provide a family’s sole income stream. Owners initially invest about $100 to build a small shack and to buy a handset and charger, an expense of $40 to $60. The SIM card and activation could cost another $10 to $20. In Kenya, mobile-service entrepreneurs often forgo the shack and instead carry handsets on lanyards around their necks, finding customers as they stroll around marketplaces. Most kiosk owners we surveyed in Kenya charge about 25 cents per minute for a local call and about 50 cents for an international one. Kiosk owners and strolling vendors alike earn as much as $400 per month, much more than what many college graduates earn at Kenyan corporations.
- Text messaging is BIG there also, cause many times SMS are free…and not easy to use if your T9 doesn’t work for your language
- …and so one…
Cell phones slice through all those obstacles and provide African solutions to African problems.
Cell Phone Use Changes Life in Africa | Digital Vision Fellowship Collaboration Framework
In the excellent BBC articles, which depicts a journey through Kenya with the cellphone as a red line, this piece really worth it:
Despite millions of dollars in aid money, the Kenyan government never quite got round to finishing the road. This key piece of infrastructure is now being upgraded by Chinese engineers in return for an oil deal. It is testimony to the kleptocratic elite’s inability to do the simplest things. Even the railway that runs alongside the road is, say locals, similarly shambolic. Contrast that to the mobile network which it is excellent all the way along this main artery. It was built in four years, by Celtel and Safaricom. Admitted, building a network of generators and masts is easier than laying mile after mile of tarmac in an area known for man eating predators – but to many Kenyans the contrast is telling.
BBC NEWS | Technology | From Matatu to the Masai via mobile
Yes really, when nothing is working, your state is corrupted: If something is working you squizze juice as much as possible from it, and Africa has a loooong history, complex cultural scheme, so a lot of inventiveness and social wealth (yes it may sound surprising, but if your social scheme are old, and so complexes, you have complexity, so you have a kind of wealth cause you have to and know how to master this complexity … this is the difference between a young country and a thousand years one, but I digress): technology allows to unleash this energy and creativity.
This leads to a highly important part of the Africa culture: the strength of the community model, very different from our own:
While most people here cannot afford a cell phone, this has not prevented thousands of poor villagers from transforming their friends and families into walking communications nodes. This setup is deeply rooted in the traditional African communal mode of living, which many urban dwellers haven’t abandoned.
This community access model is also proving to be a rainmaker for cell-phone carriers. Recent research by Merrill Lynch indicates that the average monthly revenue per cell-phone user in Nigeria is much higher than that of South Africa and the United States. Nigeria’s economy is six times smaller than that of South Africa and 1,000 times smaller than that of the United States. This suggests that the economic and social value of a cell phone in countries like Nigeria is much higher than it is in Western nations.
Wireless in Kenya Takes a Village -
This perhaps explain why it is so important in Africa to stay in touch, to share things, etc…an ideal carrier market after all?
To fuel this assertion, here is a new cash cow, hum sorry killer application, put in place in Kenya, specific to emerging countries with low penetration of bank accounts: money transfer by mobile. And this is before EU/US (and Japan, but not sure about this one ).
Known as M-Pesa, or mobile money, the service is expected to revolutionize banking in a country where more than 80% of people are excluded from the formal financial sector. Apart from transferring cash – a service much in demand among urban Kenyans supporting relatives in rural areas – customers of the Safaricom network will be able to keep up to 50,000 shillings ($370) in a “virtual account” on their handsets.
M-Pesa’s is simple. There is no need for a new handset or SIM card. To send money you hand over the cash to a registered agent – typically a retailer – who credits your virtual account. You then send between 100 shillings (74p) and 35,000 shillings (£259) via text message to the desired recipient – even someone on a different mobile network – who cashes it at an agent by entering a secret code and showing ID. A commission of up to 170 shillings (£1.25) is paid by the recipient but it compares favorably with fees levied by the major banks, whose services are too expensive for most of the population.
Remittances sent from nearly 200 million migrant workers to developing countries totaled £102bn last year, according to the World Bank. The GSM Association, which represents more than 700 mobile operators worldwide, believes this could quadruple by 2012 if transfers by SMS become the norm. Vodafone has entered a partnership with Citigroup that would soon allow Kenyans in the UK to send money home via text message. The charge for sending £50 is expected to be about £3, less than a third of what some traditional services charge.
Kenya sets world first with money transfers by mobile | Technology | Guardian Unlimited Technology
M-Pesa is being rolled out in Kenya in partnership with Citibank and Commercial Bank of Africa. Vodafone Group Plc, the Government’s partner in Safaricom, plans to offer the service in other markets. “The service will provide an affordable, fast and safe way to transfer money by SMS,” Joseph said on Tuesday.
Headlines | Safaricom launches world’s first mobile money service
As always, when you don’t have existing technologies/infrastructures, you can go directly to the most advanced one, bypassing classical technologies gates, like bank account, plastic money and credit cards to directly use what you have all the time with you: your cellphone…
To conclude:
Before reading all those articles my vision was really simplistic: The evil carriers and big OEM were willing to get the food out of the poor mouth selling them services they don’t need….But it is the other way round:
- Kenyan know what they want and need…and how much they are willing to pay for it.
- Why deploy outdated technologies like land line/plastic money when you can directly jump to next generation?
Africa is, and will certainly be a BIG wireless market, and I wasn’t expected it soooo soon: - Raw number of possible customers is huge
- Willingness to use cellphone is astonishing
- As the cultural identity is high and very different across countries, handsets and services customization and adaptation have a key role to play to exploit this potential
- Wireless communication are really changing the world, after all this industry put the human being at the center again by (hyper)linking humanity…
- …I’ll perhaps study another country to get the same type of data and cellphone impact, perhaps Argentina.
A big thanks to June Arunga for her data and comments.
Hey Thomas, Impressive! Thanks for doing this! June
Akinyi | April 16, 2007Hey Thomas,
Impressive! Thanks for doing this!
June
HI WE NEED PEOPLE LIKE YOU IN KENYA. YOUR INFORMATION
NATE KWENDO | September 5, 2007HI WE NEED PEOPLE LIKE YOU IN KENYA. YOUR INFORMATION PROVIDES A CLEAR INSIGHT INTO THE ACTIVTIES OF CELLPHONE COMPANIES WHICH CONTINUE TO RIP OFF KENYANS.
Hi. Excellent. Been looking for such stats. Give more when
Gee | October 11, 2007Hi. Excellent. Been looking for such stats. Give more when you can.
Hey Thomas! This is impressive , i happen to have read
Shikoh | April 1, 2008Hey Thomas!
This is impressive , i happen to have read some of the articles you have referred (Grad School) and this is well written and summarised …i will use your work on my thessis…. HAKUNA MATATA!! , Kwaheri , na Asante sana!
(a few more words to your swahili Voc)
Please write to me. I would like to discuss with
Todd | May 12, 2008Please write to me. I would like to discuss with you. My MA Communications project is on cell phones in Kenya.
Hey , I saw your email , but there is no
Shikoh | May 12, 2008Hey ,
I saw your email , but there is no forwarding email address , for the risk of the world spamming to my inbox write to me on shikoh.gitau@yahoo.com , i will get back to you on the real address. btw i am doing my PhD on Communication and Development so it will interesting to hear from you.
cheers
Haya , sawa sawa
shikoh