Essar Telecom seeks to double investment in Kenya

Mergers, Acquisitions and Financial Results

Essar Telecom Kenya (YU) is looking to double its investments to gain an edge in the highly competitive mobile market.

Media reports last week quoted the Country Manager Atul Chaturvedi as saying that the operator had already invested $300 million (Sh24.1 billion) in Kenya and the additional investment would go towards data and enhancing its network quality.

“Investments are pretty regular; the question is making the right investment decisions that ensure that our brand is visible to our customers and attractive enough to win over new customers,” Chaturvedi said.

One area Yu has been looking to invest in is a 3G network, but he said it was not one of his company’s top priorities at the moment, given the low number of 3G enabled devices in the market.

“We don’t want to jump into the bandwagon without being prudent about the decision. Right now, we are looking at making data services more affordable,” he added.

The investment is also going to strengthen its money transfer service –Yucash- which has 350,000 customers and 5,000 agents across the country.

He said the decision to concentrate on data had been occasioned by the ongoing price war in the voice segment.

While saying that Yu had not experienced a mass exodus of its subscribers, Chaturvedi said the price war was not expected to have an immediate impact as users are still analyzing the market to see whether the rates will be sustainable before making a switch.

“Not too many people jump into the fray immediately the prices are dropped because people want to test whether the drop is permanent or will go away after a month and their investment becomes redundant,” said Chaturvedi.

Yu, which is the latest entrant into the Kenyan market, has capitalised on low call and SMS charges that have seen its subscriber numbers rise to 1.6 million in less than two years.

It banked on the Indian business model of low margins and high volume, which was quickly adopted by Zain Kenya’s new owners Bharti Airtel when it announced a new flat rate of Sh3 across networks, sparking off a vicious price war.