How Safaricom Steals Your Internet Bundle

99% of Kenya’s 6.5m internet users access it via mobile, of which Safaricom owns 77% marketshare.

In Kenya, when you buy a 1.5Gb internet bundle from Safaricom you pay 1000ksh (~$12). You’ve paid for the data, and there is no additional cost to Safaricom if you were to use that data today or a year from now. The whole concept of data bundle expiry is ridiculous, as noted by Safaricom CEO Bob Collymore when he visited the iHub:

“When you go into a petrol station and fill up your car, does the owner of the petrol station tell you to bring it back on Wednesday to take back what’s left in the vehicle? Of course not. So I ask, why the hell are we doing that?”

Bob goes on to say that he isn’t going to be an apologist for this practice, that there is a problem with leaving the data there ad infinitum. That 60 days is probably too short and that Safaricom does need to change how they handle this.

  • Until recently they just held your data hostage. If your data expired, you could recharge with just a few shillings of data, this would re-trigger your “old” data that was past the expiration, and have that available to you again.
  • Today, it is “data gone, money stolen” after expiration. They cut you off if you haven’t used all of your internet bundle in the nominal 7-90 days, no matter how much is remaining.

I brought this up with Bob Collymore, and his chief executives when they visited the iHub earlier this year (see video), at which point he admitted that it was indeed a dubious practice that would be changed to something much more open to users. You’ll see what Bob says at the 1:17 mark in the video below.

Here Bob is on video speaking to this point (I’ve saved the link to go to the right point in the video):

The other day I caught a Tweet from Sunny Bindra about some surprising changes:

Safaricom is actually very responsive on Twitter, probably the best big company on social media in the Kenya. They followed up with Sunny with this:

So, Safaricom didn’t broadcast this significant change in the way data bundles are handled broadly. Apparently, “publicized on our website” means quietly posting a PDF somewhere in the morass that is their website to notify the data using public of the changes.

If you follow the links to the PDF, you’ll find the following:

What is the Validity period?
This is the time frame that you have to use the bundles, when this period elapses it means that any remaining bundles will have expired and will not be available for use.

(Note: there is conflicting information on how long bundles will last, you can only find out by topping up a bundle. I did this for 1.5Gb and found that it’ll last 80 days, not the 30 that they say in the PDF. I don’t know if it’s more/less time for other bundle amounts.)

It’s in Safaricom’s best interest for you to keep buying more data, over and over, even if you haven’t used it. It costs them nothing to let you use it over a longer period of time, or to keep recharging it.

In Conclusion

I’m disappointed with Safaricom, especially after Bob Collymore came to the iHub and said he was going to fix this, not break it further.

This is an outright fleecing that the Safaricom team should be questioned on. In a country where they are the monopoly player on the primary source for people to access the internet, this makes them appear like a bad actor.

Basically, we’ve gone from a bad system that was promised to be made better, but which had a corrective option, to a worse system that has no option.

Other Safaricom Data Miscellany

While I’m at it, let’s go ahead and talk about a few other ways that the data service that Safaricom raises the bar for bonehead usability: buying data bundles themselves.

Case 1:
You used to be able to send airtime to a SIM card on your Safaricom modem. Then, using the inbuilt Safaricom Broadband app, send an SMS to 450 with the amount of the bundle that you wanted to buy, now 450 only seems to work for checking your balance.

With the new service updated in the aforementioned PDF you can now only use the USSD code to update it.

Solution now?
Take the SIM card out of your modem, load it in your phone and do the USSD code. Once confirmation is received, switch that SIM card back to the modem.

Yes, that’s correct. Instead of being using the software that comes native with your modem, you now have to use a phone to update your bundles. Why would you change your system to not work with everything that people use? I’m quite curious actually. I can’t understand this decision from a either the business or the product side at all.

Case 2:
Safaricom wanted to make it easier for people with modems, iPads, Android tablets and smartphones to be able to update their bundle (good idea). They created http://portal.safaricom.com/bundles for this purpose. Let’s say you’re out of data, you have no credit on your phone. How do you get to this page?

Solution?
There are none. You’re stuck because this page isn’t zero-rated. This is mind-boggling in it’s oversight. I have no data, therefore I cannot go to your page to load more data. Seriously… who is the genius that thought this up? Or, probably more accurately, what form of bureaucracy is in place that allows this mediocrity to persist?

Further, if you’re Safaricom who controls 77% of the consumer internet access in Kenya, why wouldn’t you zero-rate your whole Safaricom.com domain and make it free for anyone to surf, even if they don’t have a single shilling on their phone?

[As a resource, here is the latest quarterly Communications Commission of Kenya (CCK) PDF report on the tech scene in Kenya.]

Quick Hits Around African Tech (May 2012)

This last month has kept me too off-kilter to get a good blog post up. However, there have been some very interesting happenings around the continent, here are the ones that caught my attention:

Pivot East

East Africa’s mobile startup pitching competition is just a month away. We announced the top 50 a few weeks ago, and now the 25 Finalists are named as well. Don’t miss this event, June 5 & 6th at the Ole Sereni hotel in Nairobi.

Google Releases “Insights Africa”

This truly deserves a blog post of its own… Google spent a lot of money and time gathering information from over 13,000 people across 6 African countries (Ghana, Kenya, Nigeria, Senegal, South Africa and Uganda) to determine why, and how, people use the internet. This data is all openly available, with an outstanding visualization tool to see what the information really means, and compare it, at InsightsAfrica.com. My chart below is just one example, showing how people access the internet across these 6 countries:

Donors prioritized “industrial policy” in Asia, but “social sectors” in Africa. Why?

Kariobangi writes a compelling blog post on the difference between the aid that was prioritized for Asia versus that for Africa.

TeleRivet: An Android SMS gateway

Similar what Ushahidi offers at SMSsync, TeleRivet is a tool that allows you to use your Android phone as an SMS gateway. It’s more robust, offers an API, and makes it easy for people to get started on SMS and USSD apps. Mbwana Alliy writes up a blog post on why this is important, and the business prospects involved in utilizing this type of service.

WEF: The Global Information Technology Report 2012

The World Economic Forum’s annual report on IT has some good information on emerging markets. You can read it online here. Here’s the video:

ForgetMeNot and the rise of Africa’s Smart(er) Phones

BizCommunity has a good article on ForgetMeNot’s Message Optimizer service’s growth on the continent. This service delivers internet content to users who can only access that information via SMS. Here’s how it works:

“First, a mobile phone subscriber sends an SMS to a given short code. The message is received in the mobile company’s message centre, which then forwards to ForgetMeNot Africa’s internet servers. The servers process, route and deliver the message to the subscriber, who can then respond.”

Kenya study, impact of venture capital on small and medium sized enterprise

VC4Africa reviews a report on VC’s in Kenya. This isn’t just tech, but it is interesting and surfaces some great information. [PDF Download]

“The minimum profit before use of venture capital was Ksh 34, 866. Upon use of venture capital, the minimum profit increased to Ksh 600, 000. This shows an increase in minimum profit of 94%. The maximum profit respondents reported before use of venture capital was Ksh 38, 567,951 which increased to Ksh 62, 864,152 an increase of 63%. The average profit also increased by 69% (from Ksh 7,204,653 to Ksh 12, 202,775)”

Mpesa, a 5 Year Infographic

Just how big has Mpesa become? Take a look [PDF version].

Jason Njoku, Funding and Nigerian Movies Online

In Nigeria, Jason Njoku is at it again, raising $8m from Tiger Global Management, a US-based PE and hedge fund. Here’s an interview with him on Forbes. Iroko Partners is the world’s largest digital distributor of Nigerian movies and African music. The firm is YouTube’s biggest partner in Africa, boasting over 152 million views in 2011.

Thoughts on Africa’s Mobile Operators and Disruption

Generally speaking, mobile network operators (MNOs) were highly disruptive in the 90’s, but have continued to decrease in this over the last decade. Operators are no longer the offensive, attacking force of yesteryear, instead they’re putting up barriers and defensive walls trying to protect what they have and hide.

Instead, the disruption comes from the open web. Whenever the operators put up a blocker to what users want, usually in the form of price or access to their infrastructure, the web finds a way of displacing them. Examples abound in location based services, text messaging, video and photos.

There’s a reason operator revenue is shifting away from voice and SMS towards data. The products that got the operators here are receding in relative value. The user wants what’s available in the open web, and that’s just not found, or being provided, by the operators.

So, what is an MNO to do?

Change. Disrupt someone else. Innovate.

One of the biggest disruptors, even in this decade of MNO mediocrity, has been Safaricom – the 800lbs gorilla in my own back yard. They’ve invested in new technology, products and business models like few others, and are reaping the rewards of those strategic moves.

Do I like having a monopoly player in my market? No.
Do I feel bad for the other MNOs (Orange, Airtel and Yu) who are crying now? No, they did this to themselves.

Let’s dig into their golden-child, Mpesa, the mobile peer-to-peer payment system that’s did $3.15 billion in transaction in just the last 6 months(!). How do you know they succeeded in innovating? Well, the easy answer is looking at their profitability and user tie-in that they get from Mpesa. Look more closely and you’ll notice the other signal, all of the bank lobbies in other countries have put up huge walls, blockading an aberration like Mpesa from having sway in their country.

[Sidebar: A warning to everyone who wants to see innovation in their country. Over regulation of telecommunications and banking strangles it. South Africa and Nigeria are cases in point.]

So, Mpesa sounds to everyone like a huge success story. It is, and it’s not. What we think of as an amazing disruptive product is really only halfway up the mountain. There are too many corks being popped while money lies sitting on the table. This stems from 2 main things, which seem to be an issue of Vodafone primarily, since they own the IP for Mpesa and own a 40% stake in Safaricom:

  1. The lack of leadership by Vodafone to NOT open up an API that other businesses could build on and increase usage. They’ve stifled innovation on their own product.
  2. Their lack of vision in the global payments space. Their shortsideness in not spinning out Mpesa as its own company to take on Visa and Mastercard directly. This was one of the few products and business models that could do that.

More MNO Innovation

So, Safaricom might be stifling its own product, but they’re still not short on disruptive features and products. They do fall prey to bureaucracy and political infighting, but they’re also one of the most aggressive MNOs globally, always trying new things. Three more examples:

  • Creativity in 3g data pricing and accessibility down market.
  • First-movers in 3g and exceptional data coverage countrywide.
  • Okoa Jihazi, their product that gives a loan of credit from the operator to users who are tight on cash.

Other examples of MNOs who are innovating in Africa are:

Airtel Madagascar working with Movirtu with their new Cloud Phone, a way for people to share a phone, but keep the SIM card in the cloud.

MTN, testing Mobile Phonebook by FeePerfect out of Cameroon, a product that puts a phone book into everyone’s phone.

Small + Big

Clearly, innovative products can come to market through MNOs. What’s the common denominator on these products though? Most of them came from small companies and were then incorporated into the MNO.

Ideas come from outside, they come from the edge. Scale comes from inside, from the massive infrastructure provided by the MNO. They have to work together to succeed.

I work with, and talk to, hundreds of entrepreneurs. They have ideas, prototypes and products that just might be what the users want. They lack the access to the infrastructure to roll it out.

As an MNO, you boost your chances of success in this increasingly chaotic space by not walling everything off, but by opening it up.

Michael Joseph and Mpesa: A Missed Opportunity

Michael Joseph was the CEO of Safaricom, taking the mobile operator from 5 employees to dominating the Kenyan mobile operator market with over 80% market share in his 10 years at the helm.  Regardless of your personal feelings on the man, you have to admire the tenacious approach he took growing the business, and his willingness to invest in his company’s future, thereby decimating his (often inept) competition. 

Possibly MJ’s (how he’s known in local Kenyan parlance) greatest business move was also a measured risk, that is being the company to take a software created by parent Vodafone Group and push it into the market.  That software: Mpesa, the most successful mobile payments system in the world.  Safaricom has more transactions each day than Western Union does globally in a year.  Yes, it’s that impressive.

When Michael Joseph stepped down in October of last year, he had a blank slate.  Only he knows just how many opportunities were out there, but I’m guessing there were many.  He just announced his next move, and that is to join the World Bank and “spearhead expansion of mobile money transfers” in their member states.  

“The first fellow under the programme, Michael Joseph, will advise the Bank and governments on spreading the use of mobile phone banking, drawing on his knowledge and experience at the helm of Kenya’s largest telecommunications service provider,”

All of the business acumen and cache that MJ has built up is going to go towards being the World Bank’s ambassador for mobile money.  Meanwhile, he is maintaining a role at Vodafone as a director, where he serves as an advisor on the expansion of Mpesa to other African countries.  That’s to be expected, as he’s one of their greatest success stories to date.  Both of these, though good, seem like a waste of potential, and I’ll explain why.  

A missed opportunity

No one in the world holds as much knowledge on how to deploy a mobile money system, nor how to grow it and operate it as Michael Joseph.  However, all of his success was penned in by the fact that Safaricom only serves Kenya, he could never grow it outside of the country in a meaningful way.  Forays into Tanzania and South Africa have happened, but aren’t seeing nearly the success as in Kenya.

Vodafone knows they’re sitting on a goose that lays golden eggs, yet it’s only laid a single egg – their problem is that they’ve not figured out how to duplicate its success.  

Instead of trying to hold on to Mpesa, they should spin it out as its own entity, put Michael Joseph at its head and let it take on the world (not just Africa).  

There’s a few good reasons for this move:  

First, Vodafone is too big and slow to do this internally, it’s like all of the services and startups eaten up by other large companies that die due to not being within an ecosystem that has an entrepreneurial bent, but instead are sucked down by bureaucracy.  

Second, no one else could take this brand global and have the ability to stand toe-to-toe with other operator peers around the world like MJ could.  It needs that type of personality if it’s to do what’s next.

Third, there aren’t many opportunities that crop up that allows you to take on massively profitable and embedded incumbents and win.  In this case, that’s all of the other payment methods, including credit cards and internet payment platforms.  Mpesa could become the defacto mobile payment system for the world – displacing other methods.

To be honest, I thought this was the obvious play when Michael’s time at Safaricom came to an end – for all of the players: Vodafone and MJ himself.  I kept thinking that surely there was a reason for them not moving on it, that it might have something to do with timing.  Instead, it looks like the big IP owner, Vodafone, is unwilling to take Mpesa big – and it looks like the reason why is that they’re unwilling to let go of control (now ownership). 

That’s how it looks from where I sit, if you know more, add it below.

Kenya’s Mobile & Internet, by the Numbers (Q4 2010)

If you’ve been wondering what the numbers look like for Kenya’s mobile and ISP space, look no further than the latest CCK Report (Communications Commission of Kenya). It’s one of the best documents that I’ve seen, compiling information that you just can’t seem to find anywhere else.

Highlights of Q4 2010:

  • There are 22 million mobile subscribers in Kenya
  • 9.5% mobile subscriptions growth, which is increasing over the previous quarters
  • 6.63 billion minutes of local calls were made on the mobile networks
  • 740 million text messages were sent
  • Prepaid accounts for 99% of the total mobile subscriptions
  • The number of internet users was estimated at 8.69 million
  • The number of internet/data subscriptions is 3.2 million
  • Broadband subscriptions increased from 18,626 subscribers in the previous quarter to 84,726

Price Wars

Everyone recognizes the impact on SMS and voice, due to the price wars brought on by Airtel last year. The average, people are paying 2.65 Ksh per minute for voice representing 33.4%
reduction on pre-paid tariffs. It comes as no surprise that there was a 68.4% increase in traffic during this period, nearly triple the norm.

There’s nothing like a chart to bring this point home:

Interestingly, a decline in total number of text messages sent (4% less) was recorded. It’s an indicator that given the choice of lower cost voice, people would rather use that, and they do.

Safaricom lost 4.8% market share, from 80.1% to 75.9% (still massive). Surprisingly, it wasn’t Airtel who benefitied, as Orange made up for most of that with a 4.4% increase of their own. Airtel did lead the market by recording 1,143,353 new subscriptions, about 3x their closest competitor.

Internet

A whopping 99% of the internet traffic in Kenya is done via mobile operators, meaning 3G, Edge or GPRS. It’s to Safaricom’s credit that they moved on this early, not dithering around on data as their competition did, effectively taking the whole market.

My theory is that there are only two major players in the ISP space in Kenya. The first is Safaricom, supported by this report, who will own most of the country due to having an island strategy (mobile towers). This allows them to own all the rural areas and anyone who needs decent speeds and has to be mobile.

The other is the fiber bandwidth provider (ISP) who figures out and cracks the consumer market. The closest to doing this is Zuku (Wananchi) who started rolling out 8Mb/s high-speed fiber-to-the-home internet connections in Q4 2010 at only 3,499 Ksh ($45). These numbers aren’t reflected yet. My guess is that we’ll see Zuku tying up all the home internet connections in the major urban areas.

Estimates for those with internet access in Kenya is closing in on 9 million users, and at over 22% of the population, we can say we’re getting a lot closer to the critical mass needed for real web businesses and services to thrive.

Final Thoughts

Overall, the numbers on both mobile and internet are trending up, and at a very favorable rate. The indicators here prove that you should be paying a lot of attention to mobiles and data connectivity in Kenya.

If you’re a business, what’s your mobile plan? How are you providing and extending your services over the internet (and no, a website is not enough)?

If you’re an entrepreneur, how are you going to use this information to decide what to build? Are you paying attention to the wananchi, building apps for the upper class?

PDF of Report: CCK Report download – Kenya Q4 2010

Mobile Monday Takes Over the iHub

The only time I’ve ever seen an event have more people at the iHub is at the grand opening back in March, and Barcamp Nairobi over the summer. Today is Mobile Monday, an event that happens at the iHub about once per month, run by John Wesonga. It’s quickly becoming a big event to be at.

M-Farm

“Great ideas are always born on a tissue paper”

Jamila talks about the genesis of their idea, M-Farm: To bring farmers together to buy and sell together.

IPO48 put together a competition for Kenyan techpreneurs to pitch their ideas – the Akirachix won the 1,000,000 Ksh prize with the M-Farm idea.

How does it work?
Prices are found by information collection through crowdsourcing of that information from the farmers and by having people go out and find out the prices from the sellers as well, in locations all over Kenya.

Their goal is to give the farmer more information, through reports, to help the farmer make an informed decision on what to grow next. It’s a mixture of historical sales, predicted weather, and other information that would help them make a better decision. M-Farm works with the farmers cooperatives as well.

The unique thing about M-farm is the socialization of the farmers. It’s not just about information, it’s about the community.

Overlap

Limo Taboi and Kahenya are giving a presentation on overlapping, the term used by Kenyans when guys go into the wrong side of the road to pass others and cause a massive traction jam. Their new website is Overlap.co.ke.

“We have bad driving habits in Kenya.”

We’re trying to find a way for ordinary Kenyans to track eachother’s bad driving using the Ushahidi platform. This is everything from buses and matatus with no lights, to overlapping and reckless driving.

Right now it’s a citizen effort, but they’re hoping that one day the police will take note as well.

You can report in by submitting something to the website, by email in a report to overlap.kenya@gmail.com or using the #OverlapKE hashtag on Twitter.

Nokia Infrastructure Support

Nokia is a sponsor of tonight’s Mobile Monday. Agatha Gikunda is here to talk about the way Nokia is doing things in East and Southern Africa to engage with developers. They’re really trying to reach out to small businesses and developers to build more apps and services with Nokia software and for their handsets. Most of all, they want to help with the marketing of your new product, using the Nokia marketing infrastructure through partnerships.

One example of what they’re doing took place last week. They trained 25 developers in QT and Advanced Java at the University of Nairobi. 10 universities and key training institutions were engaged and participated in the training.

Another way they’re working with local developers and entrepreneurs is helping local app developers to market their product. Their example here is AfroHotorNot, an app that they go around and market at universities. Beyond local marketing, they also help you publish your work globally and make money off of your apps.

Other partners that Nokia has helped market globally, beyond Kenya are Sharper Innovations (LSU, Afrohotornot and Wazzup), Symbiotic Media (Tusker Project Fame and Daily Nation Media) and Shimba Technologies (Tuvitu App and MTV Music Awards app).

To get paid, Nokia takes 30% and pays out 70% to the developer. You have to have a local bank account to get paid directly, and the money is released once you reach around 100 Euros. There isn’t a really good way to get paid in Kenya, but they’re trying to get a deal with local mobile operators for operator billing to happen.

About 30 apps have been created by Kenyan devs for the Ovi Store. About 99% of those are local focused, only 3 are focused on the global market.

Agatha was asked about when they’ll have local billing integration. The answer is that they’re trying but they don’t know when it’ll happen.

To get started with the Nokia Ovi Store, go to publish.Ovi.com.

Safaricom and Innovation

“I tell my colleagues that you need to get off that ivory tower and start sitting with everyone. See what ticks.”

– Nzioki Waita, Head of Strategy and New Business at Safaricom

ICT is going to make the next 500k jobs in Kenya, and Safaricom plans to be on the forefront of that. He goes on to talk about how Safaricom is trying to be more friendly to smaller organizations and entrepreneurs in the country. You used to be able to predict with some certainty the types of value added services that would work. Now, enter the smartphone and data connections, and your phone is now a vehicle to a new destination. Life became more complex to us.

We now get people walking into our office saying “I have an idea, it will make money for both of us.” The people they were coming to talk to weren’t set up to take on these kinds of ideas. This made them form a “new products” division where Mpesa and the VAS team’s are seated.

They’ve moved away from the stages where you’d walk in with an idea and then you’d never hear from Safaricom again. Now they have to deal with the ideas, and they’re trying to understand a better way to do that (see my post on the Safaricom Innovation Board). They’re trying to figure out how to channel it.

What Safaricom is doing:

  • SDP (Service Delivery Platform) plus and App store launching at the same time.
  • Safaricom Academy (with Strathmore Univ). A way to get young innovators working on their ideas with training.
  • Incubation Centre. A small space within Safaricom to incubate ideas on their infrastructure
  • The Safaricom Innovation Board – A group who helps set policy and buffers devs from Safaricom and vice versa.
  • The Safaricom Garage – a place for devs to come and work on a portion of the Safaricom network (location based services, billing, etc.)

Nzioki won’t discuss revenue share, unfortunately. Too bad, they need to be a lot more open about the money side of this equation, otherwise it will be perceived as the same old Safaricom.

John Waibochi of Virtual City

Virtual City is also a sponsor for the Mobile Monday event, and John Waibochi, the CEO is here. Virtual City recently won the $1m Nokia Growth Economy Venture Challenge about 3 months ago.

Quick Hits Around African Tech

Africa’s mobile industry needs to re-invent itself to meet tomorrow’s challenges
Another great zinger from Russell Southwood’s Balancing Act on the state of the mobile industry across Africa and what needs to change.

“Furthermore, although the shift to data puts a spring in the step of most mobile executives, the shift to an interest in services and apps has the potential to marginalise them as “dumb pipe” operators. The new generation of OS operators (Blackberry, iPhone, Android and others) are offering services and apps in a way that the mobile operators failed to do.”

Desert discs: How mobile phones are at the root of Saharan music.
Christopher Kirkley went to Mali to make field recordings, but returned with a mixtape of music taken from Saharan Sim cards.

African Facebook stats, by Country:

“Only 1.7% of Africans are on Facebook, but since there is only 10.9% Internet penetration, we see that 15.9% of African Internet users are on Facebook.”

Kenyan Internet users woo businesses to Twitter and Facebook

“According to the research, Kenya is ahead of its peers in East Africa in social networking with an average consumer spending atleast 6.5 hours per week, followed by Tanzania — 1.6 hours per week — and Uganda 1.5 hours per week.”

Reflections with Michael Joseph in his last week as CEO of Safaricom:
(Video 1, Video 2)

Reflections with Michael Joseph from Al Kags on Vimeo.

Wrong model. Wrong place.
Ken Banks discusses the challenges of normal business models in the ICT4D and M4D space.

The Future of Mobile in Africa:
A great deck by Rudy de Waele, from his talk at Mobile Web Africa 2010.

Snapshot: Mobile Data Costs in East Africa

IMG_0073I get asked a lot about mobile data costs in East Africa, so thought I would put it in writing for everyone to find easier.

Mobile data access charges have fallen drastically in the last several years in East Africa, in large part to the SEACOM undersea cable arriving and increased competition between operators. Data connectivity is the new battleground, fighting not just amongst mobile competitors, but also with traditional ISPs.

In the mobile data connectivity space, each country sells either data capped bundles (or time capped bundles in the case of Uganda) that can be loaded onto a SIM card. There are out of bundle charges, priced per Megabyte or Kilobyte, but these rates are exorbitant, so anyone who connects regularly uses a bundle of some sort.

More creative offerings come out each month by the mobile operators, making it more confusing and harder to compare against competing services, but also offering some incredibly low pricing for entry-level users, or consumers who don’t need high speeds.

No doubt, a downward trend of mobile data charges will spur the growth of mobile web usage and publisher forwards.

Kenya
In Kenya, from charging internet usage at 10 shillings a minute just a few years ago, now cyber cafes charge 1 shilling a minute for browsing. The use of mobile data has been made easier by increasingly cheaper rates. For example in Kenya, Safaricom are offering a limited 10MB worth of mobile internet usage at 8 shillings per day. Zain Kenya offers unlimited internet usage for 3,000 shillings per month. Orange Kenya on the other hand are having a 7-day unlimited offer for their 3G network at 1000 shillings.

Uganda
In Uganda costs for mobile data connectivity have been driven down by the SEACOM cable landing in 2009, and led by costs cutting by Orange. Orange was first to the market with cheap, affordable 3G service and has played a major role in driving market prices down. They were the first to institute 5,000Ush/day & 25,000Ush/week packages for Internet – finally making it accessible to the common man. MTN, the larger network in Uganda,

Tanzania
Tanzania boasts some of the most unreliable data networks with the least penetration within East Africa. Zain and Vodacom both offer 3g, while Tigo offers GPRS. Zantel and Sasatel are CDMA networks, with EVDO connectivity. All networks, no matter what the speed of the connection, charge a flat rate of 40,000Tsh for 1gb of data. Data prices have gone down, but not noticeably.

While not possible to do an apples-to-apples comparison of the rates between the three countries, here is a pricing comparison chart for 3g data on 1Gb bundles and 1Mb pay as you go costs for the leading operator in each country:

Kenya
(Safaricom)
Tanzania
(Vodacom)
Uganda
(MTN)
1Gb of 3g data
(bundle)
2500 Ksh 40,000 Tsh 49,000 Ush
USD equivalent 1Gb of 3g data
(bundle)
$30.90 $26.56 $21.63
1Mb of 3g data
(Pay as you go)
8 Ksh 120 Tsh 900 Ush
USD equivalent 1Mb of 3g data
(Pay as you go)
$0.10 $0.08 $0.40

As is true in this hyper competitive market, these numbers will change (hell, I’m probably already off on something). The overriding trend is that the costs are going down for consumers, even if slower than we’d all like to see.

[Picture courtesy of Stefan Magdalinski]

Banks Blocking Mobile Money Innovation in Africa?

There’s an good post over at the CGAP blog about mobile money’s innovation crisis. The author claims that nothing new has happened in mobile money since Mpesa was launched in Kenya, except for maybe the launch of Mkesho this year in Kenya as well. Besides that, everyone around the world pretty much tries to duplicate what Safaricom is doing in this space.

Why?

“There may also be one partnership in particular that could be hampering innovation—that with the banks. Historically, these two players have taken very different strategies for new product development, especially in resource poor countries.”

Thinking big picture

You can send up to $500 for as little as 37 cents using Mpesa. On Zain it will cost you 74 cents. That’s an insanely low transaction cost compared to what banks charge, and that’s not even going into the fact that they can’t do transactions as low as 50 to 100 Ksh ($.60 to $1.24). The kicker, you can store your money in it for no fee at all (unlike the usurious rates that the banks charge).

Simply put, banks cannot compete with mobile operators when it comes to transacting payments for the majority of Africans.

Regulators make and enforce the rules around everything. How do they make their decisions, who lobbies them and why? Is the reason that we haven’t seen a true replication of Mpesa anywhere besides Kenya due to the banking sector protecting its interest?

Opportunity lost

Right now anyone in Kenya can do every type of transaction within our own borders, and if creative into neighboring countries as well. A few other countries have the ability to do this type of thing as well, if less efficient and/or elegantly conceived.

Currently opportunity is lost by local merchants in not integrating mobile payment structures better into goods and services offered to both businesses and the public. This is changing, businessmen are quick to move to figure out new ways to increase margins and customers. It’s only held back by the operators not willingly opening up their platforms for easier integration into business.

11% of Kenya’s GDP was shifted through Mpesa in 2009, and the company expects that to be around 20% this year.

We can all agree those are big numbers and that a massive ability to make money has been shown in Kenya. This begs two questions:

  • Why has no one allowed it to truly replicate in another country?
  • Why is no one throwing big money after this, trying to figure a way to scale a mobile operator and bank agnostic payment solution across a region, if not the whole continent?

There are big players trying to break into the greater African market (I’m looking at you Naspers). There are banks who have the money to spend on figuring this out, but aren’t thinking beyond their own brand, so continue to fail. Maybe the answer is we just should sit here and let all this lost opportunity continue to drift by us, waiting on the big credit card players of the world like Visa or Mastercard to make a move.

That’s a fatalistic stance, and I certainly hope it’s not true. Unfortunately, I don’t think we’ll see this service come from 2 guys coding in a garage. Instead, I hope that there are mobile operators and banks banding together to make something bigger than themselves that make more profits for everyone. If not them, a big investor willing to wager millions of dollars on making billions.

Safaricom Innovation Board and the Kenya Tech Community

Safaricom is Kenya’s largest mobile operator with approximately 80% of the market. Most people don’t know this, but they get hundreds of business and technology proposals each week from people all over the country – techies and non-techies alike. It was with this problem in hand that they decided to open up an “Innovation Forum” for Kenyans to share their ideas.

In short, it was a disaster. Draconian legal terms and conditions mixed with ham-handed community engagement meant that they met with a lot of resistance and outright mockery on public channels such as Twitter and Facebook. Just a sample from one blogger:

Engaging the Community

Safaricom is now back to the drawing board. Their problem hasn’t gone away, they’re still overwhelmed with emails, letters and proposals for business ideas that might/might not make sense for them to engage on. Wadzanai Chiota-Madziva heads up their VAS (value added services) department, and is in charge of this. After the noise caused by the less-than-stellar launch of the Innovation Forum, she and CEO Michael Joseph met with one of the techies who was very concerned about the way they were handling this: Al Kags.

Al Kags has sat down in a couple of meetings with them thus far, finally he suggested a board that could serve as a buffer between Safaricom and the people sending in proposals. The Innovation Forum Board’s job would be to speak for the community to Safaricom, as well as push for better access to APIs, a developer sandbox and possibly and app store. They would also be responsible for helping to translate Safaricom’s position to the community.

I was invited, along with some other’s from the tech community, to sit down and discuss this with them last week. It was a fruitful discussion about the possibilities and the roles and responsibilities that the board would have.

Some of the discussion was about the need for a buffer to be created between Safaricom and submissions to foster fairness and openness, to provide confidence to developers to innovate without fears of intellectual property (IP) misappropriation.

“The intention is for the board to create a fair environment for innovatioin by playing the middle ground between Safaricom Ltd and the developer and innovator community”

The position is largely one of an enabler. The board would oversee the Innovation Forum by:

  • Create and agree rules of engagement with all parties
  • Advocate developers perspectives at Safaricom
  • Facilitate understanding of Safaricom position with the developer/innovator community.

Figuring out the Board

The people invited for the meeting, as the potential board, were Moses Kemibaro, Jessica Colaco, Al Kags, Karanja Macharia, Rehema Parmena and myself.

While it is up to Safaricom to decide who is on their Innovation Forum Board, those of us at the meeting pushed back a little on how they had done this. If they want to interact with the community, it might behoove them to reach out to that community for some of the nominations.

They listened, and starting today going through the end of the week, you can make your own nominations for the Innovation Forum Board for Safaricom to review on the website. This is your chance to put a name in of someone that you think would represent the community well on the board.