[April 16, 2010] Money Transfers Drive Telcos Revenues Tweet Apr 16, 2010 (Business Daily/All Africa Global Media via COMTEX) -- Revenues in the mobile sector are set to more than double over the next four years, cementing the sector's importance to the country's economic revival, analysts say. But while the development is good news for the consumer who can expect reduced tariffs and enhanced access to telecommunication services due to competition in the sector, it will translate to lower profit margins for mobile players. A new report from Pyramid Research examining the country's mobile sector projects that mobile money transfers and data are set to become top revenue earners for mobile firms in the next four years, but notes that voice will retain its status as the largest contributor. "Increased competition will be the main driver of growth as lower service tariffs bring mobile services within reach of a greater proportion of the population," said Deniss Radcenko, an analyst at Pyramid Research in its Kenya Intelligence Report. "As the economy recovers in 2010, we expect that the increasing adoption of new services, such as advanced data services, will result in stronger revenue growth. Although mobile voice services will generate the largest growth in dollar terms rising from $978 million in 2009 to $1.1 billion in 2014, mobile data will be the telecom sector's fastest growing revenue stream," says the Kenya Intelligence Report. The report says that revenues from the country's fast growing mobile sector will rise from Sh94 billion recorded in 2009 to Sh138 billion in 2014, indicating that the industry is still ripe for investment and growth. The news is set to have implications for local players, who are currently preparing for the entry of a new competitor in the form of Bharti Airtel, who completed its purchase of Zain Africa's units last month. Bharti's entry is expected to shift the status quo in the industry, forcing renewed strategic emphasis on pricing and product offering as the Indian firm rolls out a strategy likely to target the low end and largely untapped subscribers market. Eleven years after the advent of Kenya's mobile services, the sector has distinguished itself as a high growth market, with subscriber numbers rising from just 40,000 in 1999 to the current 18 million. Analysts predict that the four players in the sector - Safaricom, Zain, Telkom Kenya and Essar - will have a combined 20 million subscriber by year's end, with Pyramid saying that there will be 30 million subscribers in four years, with 68 per cent of the population penetrated. While Zain, and Safaricom have in the past warned that they anticipated their average revenue per user (ARPU) would follow a more modest growth path going forward compared to earlier years of operation, Pyramid states that future growth will continue to push the country to become one of the region's most attractive markets. Already, mobile firms are recording lower ARPU for voice services, which have dropped from averages of $8 two years ago to $5 currently. Research from African Alliance indicates that these developments could lead to market leader Safaricom market share dropping from the current 78 per cent to 69 per cent in 2014. But with revenues expected to grow at a CAGR of 5.1 per cent in the 2009-2012 period, Kenya's telecom market growth will exceed that of Turkey and Saudi Arabia and will approach that of Nigeria and Egypt, according to Pyramid Research. Driven by the expansion of data services, particularly mobile banking, the mobile market will expand on the back of successes in mobile data services, such as Safaricom's M-Pesa money transfer service, which demonstrate the potential for mobile banking initiatives. "We expect that mobile data revenue will increase from an estimated Sh7 billion in 2009 to Sh22 billion in 2014, partly due to the introduction of 3G services (including mobile broadband) but also due to the expected growth of low-tech, low-margin mobile data services, particularly mobile money transfer," said Mr Radcenko. Broadband Internet services revenue is also expected to grow over the next five years, generating Sh5 billion in 2014, up from Sh1 billion in 2009, a CAGR of 30 per cent. Most firms in the market have signalled their intention to aggressively pursue data in coming months, with Telkom Kenya, Zain and Essar indicating interest in the 3G licence that has won market leader Safaricom over 2.5 million data subscribers. [ Back To TMCnet.com's Homepage ]