AccessKenya to Feel Price War Heat on Internet services

Listed internet service provider AccessKenya is set to feel the pressure of mobile phone companies' increasing forays into the home internet market, analysts said, citing last week's move by Telkom Kenya to halve its charges on its internet modems. AccessKenya has over the years focused on a niche' of providing internet through corporate leased lines and the high-end residential market. But as mobile phone companies step up their game by providing cheaper, high speed and more reliable home internet connections, analysts say AccessKenya may be forced to lower its charges to match the competition--further eroding its income. "The move to provide significant bandwidth by telcos presents a challenge to AccessKenya residential internet business especially for home office operators who may consider cost implication critical in lowering their operation overheads," said Eric Musau, a research analyst at African Alliance. Mr Musau, however, said AccessKenya's reputation as a provider of reliable internet connections may play to its advantage, giving the Nairobi Stock Exchange time to prepare for the ongoing onslaught by mobile phone companies whose main selling point now is cheaper prices. He added that the low level of internet penetration provides large room for growth by all service providers, but could limit AccessKenya's expansion if it is perceived to be providing relatively more expensive services to the mobile phone firms. Telkom Kenya last week announced a decision to double bandwidth capacity at the existing charges, and rivals Safaricom and Zain are expected to announce similar moves going by past retaliatory trends by the telcos. In the first half of the current financial year, AccessKenya's turnover dropped by 17.5 per cent to Sh876 million after increasing bandwidth capacity to its customers at existing prices. The group managing director said in a statement after announcing the results that growth of the firm's revenues would depend on "strong growth in both the corporate and residentail customer base driven by higher speeds and lower costs offered to customers." "Sustained growth in the residential market will be a challenge given the fast rate of penetration by mobile and wireless internet access to this market segment," says a research note by African Alliance. Currently, the corporate leased line segment is AccessKenya's core source of income, accounting for 92 per cent of the firm's top line. With increased competition following the landing of three fibre optic cables, Access Kenya has had to increase its bandwidth to its consumers rather than lower the unit charge. (Source: Business Daily)